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Cloud Peak Energy Inc. – IPO: ‘S-1/A’ on 10/17/08

On:  Friday, 10/17/08, at 4:30pm ET   ·   Accession #:  1047469-8-11034   ·   File #:  333-152870

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

10/17/08  Cloud Peak Energy Inc.            S-1/A                  5:2.9M                                   Merrill Corp/New/FA

Document/Exhibit                   Description                      Pages   Size 

 1: S-1/A       Pre-Effective Amendment to Registration Statement   HTML   2.02M 
                          (General Form)                                         
 2: EX-23.1     Consent of Experts or Counsel                       HTML      7K 
 3: EX-23.2     Consent of Experts or Counsel                       HTML      8K 
 4: EX-24.1     Power of Attorney                                   HTML      8K 
 5: EX-99.2     Miscellaneous Exhibit                               HTML      8K 

Table of Contents

As filed with the Securities and Exchange Commission on October 17, 2008

Registration No. 333-152870

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

CLOUD PEAK ENERGY INC.
(Exact name of registrant as specified in its charter)

505 S. Gillette Ave.
Gillette, WY 82718
(307) 687-6000
(Address, including zip code, and telephone number, including area code, of registrant's principal executive offices)

Colin Marshall
Chief Executive Officer
Cloud Peak Energy Inc.
505 S. Gillette Ave.
Gillette, WY 82718
(307) 687-6000
(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

         Approximate date of commencement of proposed sale to the public:    As soon as practicable after this Registration Statement becomes effective.

         If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.    o

         If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

         If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

         If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

         Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act (check one):

CALCULATION OF REGISTRATION FEE

(1)

Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933.

(2)

Previously paid.

         The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

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The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED OCTOBER 17, 2008

             Shares

CLOUD PEAK ENERGY INC.

Common Stock

        Prior to this offering, there has been no public market for our common stock. The initial public offering price of our common stock is expected to be between $             and $             per share. We have applied to list our common stock on the New York Stock Exchange under the symbol "CLD."

        Prior to the completion of this offering and the concurrent offering of our             % Series A Mandatory Convertible Preferred Voting Stock by means of a separate prospectus, we will effect a series of transactions with Rio Tinto America Inc., an indirect wholly owned subsidiary of Rio Tinto plc. Rio Tinto America Inc. is the selling shareholder in this offering and the concurrent offering. Upon completion of these transactions and prior to this offering, the selling shareholder will own all of our issued and outstanding common stock and preferred stock, and we will own Rio Tinto America Inc.'s western U.S. coal business, other than the Colowyo mine. See "Separation Transactions and Related Agreements."

        The selling shareholder is selling             shares of common stock, representing             % of the selling shareholder's shares of common stock in this offering, and              shares of our             % Series A Mandatory Convertible Preferred Voting Stock in the concurrent offering, representing all of its    % Series A Mandatory Convertible Preferred Voting Stock. The selling shareholder will retain approximately             % of our shares of common stock, all of which will be subject to a Registration Rights Agreement between us and the selling shareholder.

        We will not receive any of the proceeds from the shares of common stock sold by the selling shareholder in this offering or from the shares of the             % Series A Mandatory Convertible Preferred Voting Stock sold in the concurrent offering.

        The underwriters have an option to purchase a maximum of             additional shares of common stock from the selling shareholder to cover over-allotments of shares of common stock.

        Investing in our common stock involves risks. See "Risk Factors" on page 18.

        Delivery of the shares of common stock will be made on or about                           , 2008.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Credit Suisse

The date of this prospectus is                           , 2008.

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TABLE OF CONTENTS

        You should rely only on the information contained in this document or any free writing prospectus prepared by or on behalf of us or to which we have referred you. We have not authorized anyone to provide you with information that is different from the information contained in this document or any free writing prospectus prepared by or on behalf of us or to which we have referred you. This document may only be used where it is legal to sell these securities. The information in this document may only be accurate on the date of this document.

Dealer Prospectus Delivery Obligation

        Until                        , 2008 (25 days after the commencement of this offering), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealer's obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.

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PROSPECTUS SUMMARY

        This summary highlights information contained elsewhere in this prospectus. This summary does not contain all of the information you should consider before investing in our common stock. You should read the entire prospectus carefully, including the section describing the risks of investing in our common stock under "Risk Factors" and the consolidated financial statements of our predecessor, Rio Tinto Energy America Inc. contained elsewhere in this prospectus before making an investment decision. Some of the statements in this summary constitute forward-looking statements. See "Special Note Regarding Forward-Looking Statements." For a reconciliation of our pro forma financial information to our historical financial information, see "Unaudited Pro Forma Consolidated Financial Information."

        In this prospectus, unless the context otherwise requires, references to "Cloud Peak Energy," "we," "us," "our" or the "company" refer to Cloud Peak Energy Inc. and its subsidiaries, as in effect assuming that the separation transactions described in this prospectus have occurred.

        We are concurrently offering shares of our common stock and our Series A Preferred Stock. The initial public offering of our common stock is conditioned upon the offering of our Series A Preferred Stock, and the offering of our Series A Preferred Stock is conditioned upon the initial public offering of our common stock. Unless the context requires otherwise, in this prospectus the term "offering" refers to both our offering of common stock and our offering of Series A Preferred Stock.

        Certain industry and other technical terms used throughout this prospectus relating primarily to our business, including terms related to the coal industry, coal reserves, mining equipment and coal regions in the U.S. are defined under "Glossary of Selected Terms" beginning on page 180 of this prospectus.

Cloud Peak Energy Inc.

        We are the second largest producer of coal in the U.S. and in the Powder River Basin, or PRB, based on 2007 coal production. We operate some of the safest mines in the industry. According to data from the Mine Safety and Health Administration, or MSHA, in 2007 we had the lowest employee all injury incident rate among the 5 largest U.S. coal producing companies. We operate solely in the PRB, the lowest cost coal producing region of the major coal producing regions in the U.S., and operate three of the five largest coal mines in the region and in the U.S. Our operations include four wholly-owned surface coal mines, three of which are in Wyoming and one in Montana, and we own a 50.0% interest in another surface coal mine in Montana. We produce sub-bituminous steam coal with low sulfur content and sell our coal primarily to electric utilities. Steam coal is primarily consumed by electric utilities and industrial customers as fuel for electricity generation. In 2007, the coal we produced generated approximately 6.0% of the electricity produced in the U.S.

        Prior to the completion of this offering and the concurrent offering of our    % Series A Mandatory Convertible Preferred Voting Stock, or our Series A Preferred Stock, a series of transactions will be taken to separate certain Colorado-based coal, certain non-coal and other U.S. assets from Rio Tinto America Inc.'s, or Rio Tinto America's, western U.S. coal business. We will own Rio Tinto America's western U.S. coal business except for the Colowyo coal mine in Colorado. Due to the terms, conditions and other restrictions contained in the existing financing arrangements with respect to the Colowyo mine, the Colowyo mine will not be transferred to Cloud Peak Energy. Rio Tinto plc and Rio Tinto Limited, collectively, Rio Tinto, is one of the largest mining companies in the world.

        For the year ended December 31, 2007 and the six months ended June 30, 2008, excluding Colowyo and other non-coal business, we:

•

produced 132.3 million and 65.4 million tons of coal, respectively;



•

generated pro forma revenues of $1,419.8 million and $789.7 million, respectively; and



•

had pro forma net income of $             million and $             million, respectively.

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        The tables below summarize the tons of coal produced and proven and probable coal reserves by mine as of December 31, 2007 and other data regarding our controlled coal:

(1)

Based on our 50% interest in our Decker mine.

(1)

Relates to our Cordero Rojo mine.

        Our business and operations, including our strengths and strategy listed below, are subject to numerous risks and uncertainties, including risks related to coal prices and mining operations, coal consumption, including electricity demand, and economic and financial conditions, among others, any or all of which could materially and adversely affect our business and market position. See "Risk Factors" beginning on page 18 of this prospectus.

Our Strengths

        We believe that the following strengths enhance our market position:

         We are the second largest coal producer in the U.S. and in the PRB and have a significant reserve base.    Based on 2007 production of 132.3 million tons, we are the second largest coal producer in the U.S. and in the PRB. As of September 30, 2008, we controlled approximately 1.7 billion tons of coal, consisting of approximately 1.4 billion tons of proven and probable coal reserves and 104 million tons of non-reserve coal deposits as of December 31, 2007, and approximately 288 million tons of additional non-reserve coal deposits, according to Bureau of Land Management, or BLM, estimates, that we acquired in April 2008. Our future success and growth will depend on our ability to acquire additional coal that is economically recoverable.

         We operate highly productive mines in the PRB, the lowest cost coal producing region of the major coal producing regions in the U.S.    All of our mines are located in the PRB, which is the lowest cost coal producing region of the major coal producing regions in the U.S. We believe that our large PRB mines provide us with significant economies of scale. We benefit from the fact that our mines are among the lowest cost and highest producing mines in the U.S. However, our coal mining operations are subject to numerous operating risks that are beyond our control which could result in materially increased operating expenses or decreased production levels.

         Our acquisition of additional LBAs and surface rights and our substantial capital investments in our mines in recent years have positioned us well for the future.    We have focused on strategic acquisitions and subsequent expansions of large, low operating cost, low sulfur operations in the PRB

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and replacement of, and additions to, our reserves through the federal coal leasing process, also known as the Lease by Application, or LBA, process and the acquisition of related surface rights. From January 1, 2005 to October 1, 2008, we acquired an additional 283 million tons of reserves as well as the recently acquired the South Maysdorf tract that the BLM estimates to contain 288 million tons of non-reserve coal deposits for a total commitment of $417.0 million, of which we have already made cash installment payments of $146.1 million. From January 1, 2005 to June 30, 2008, we have also made significant investments in our mining facilities and equipment, including significant capital expenditures in our plant facilities and equipment of approximately $552.5 million. These investments have increased our existing mines' capacity and productivity. We have also nominated as LBAs tracts of land that we believe contain, as applied for, approximately 1.8 billon tons of non-reserve coal deposits according to our estimates and subject to final determination by the BLM of the final boundaries and tonnage for these LBA tracts. Accordingly, we believe we are well-positioned for the future through the strategic acquisition of additional LBAs and surface rights. If we are unable to acquire additional LBAs or surface rights, our business, financial condition or results of operations could be adversely affected.

         We are well-positioned to take advantage of strong industry trends in the U.S. and in the PRB region.    Recent increases in U.S. coal consumption have been driven primarily by increased use of existing electricity generation capacity and the construction of new coal-fired power plants. We expect to the extent that the capabilities for shipping large volumes of western U.S. coal to eastern U.S. markets continue to improve, PRB coal may increasingly be substituted for eastern U.S. coal, which is currently in short supply due to increased export demand and production constraints. In addition, increasingly stringent air quality laws and the related cost of scrubbers may favor low sulfur PRB coal over other types of coal, creating additional domestic demand for PRB coal. According to the U.S. Energy Information Administration, or EIA, annual U.S. coal demand is projected to reach 1.33 billion tons by 2020, compared to demand of 1.13 billion tons in 2007 (which assumes no future federal or state carbon emissions legislation is enacted). The western U.S. is expected to represent approximately 56% of the U.S. coal demand in 2020. This increased demand for coal is driven by an increased demand for electricity. If the increased demand for electricity is met by new power plants fueled by alternative energy sources, such as natural gas, or if state or federal mandates are implemented to support or mandate the use of alternative energy sources, these strong industry trends may not continue.

         Our employee-related liabilities are low for our industry.    We only operate surface mines. As a result, while we are exposed to certain health claims and post-retirement liabilities, such as black-lung disease, this exposure is lower relative to some of our publicly traded competitors that operate underground mines. Our pension obligations were fully funded at the end of 2007. As part of our separation from Rio Tinto America, obligations for pension and post-retirement welfare for active employees will be retained by us, and obligations for employees who have retired as of the date of our separation from Rio Tinto America will be retained by Rio Tinto America.

         We have a strong safety and environmental record.    We operate some of the industry's safest mines. According to data from MSHA in 2007 we had the lowest employee all injury incident rate among the 5 largest U.S. coal producing companies. All of the mines we operate are ISO 14001 certified, and we are committed to maintaining a system that controls and reduces the environmental impacts of mining operations. We have also won numerous state and federal awards for our strong safety and environmental record.

         Our senior management team has extensive industry experience.    Our senior management team has significant work experience in the mining and energy industries, with on average    years of relevant mining experience. Most members of our senior management team gained this experience through various positions held within Rio Tinto and its subsidiaries, collectively, the Rio Tinto Group.

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Our Strategy

        Our business strategy is to:

         Capitalize on favorable U.S. and worldwide coal industry market conditions.    Growth in domestic coal consumption and a sharp rise in U.S. coal exports, particularly from the eastern U.S., have resulted in coal prices in recent periods significantly above the historical averages. As higher Btu eastern U.S. coal is shipped to international markets for steam and metallurgical use, and to the extent that the capabilities for shipping large volumes of western U.S. coal to eastern U.S. markets continue to improve, PRB coal may increasingly be substituted for eastern U.S. coal, which is currently in short supply due to increased export demand and production constraints. While only a small percentage of PRB coal is currently exported, recent interest from foreign buyers is increasing, including for higher Btu coal from our Spring Creek mine in Montana. No assurance can be given that these recent trends in the coal industry will continue.

         Continue to build our reserves.    We have focused on strategic acquisitions and subsequent expansions of large, low cost, low sulfur operations in the PRB and replacement of, and additions to, our reserves through the acquisition of companies, mines and reserves. We will continue to seek to increase our reserve position by acquiring federal coal through the LBA process and by purchasing surface rights for land adjoining our current operations in Wyoming and Montana. We have applications outstanding for four LBAs to be bid over the next three years, that cover, as applied for, approximately 1.8 billion tons of non-reserve coal deposits according to our estimates and subject to final determination by the BLM of the final boundaries and tonnage for these LBA tracts. We will continue to explore additional opportunities to increase our reserve base, however, if we are unable to do so our market share will decline.

         Focus on operating efficiency and leverage our economies of scale.    We will seek to control our costs by continuing to improve our operating efficiency. Following this offering and our separation from Rio Tinto America, we will remain the second largest producer of coal in the U.S. based on 2007 production statistics. We believe we will continue to benefit from significant economies of scale through the integrated management and operation of our four wholly-owned mines, although our results as a separate stand-alone company could be significantly different from our historical financial results as part of the Rio Tinto Group. We have historically improved our existing operations and evaluated and implemented new mining equipment and technologies to improve our efficiency. Our large fleet of mining equipment, information technology systems and coordinated equipment utilization and maintenance management functions allows us to enhance our efficiency. Our experienced and well-trained workforce is key in identifying and implementing business improvement initiatives.

         Leverage our excellence in safety and environmental compliance.    We operate some of the safest coal mines in the U.S. We have also achieved recognized standards of environmental stewardship. We continue to implement safety measures and environmental initiatives to promote safe operating practices and improved environmental stewardship. We believe the ability to minimize injuries and maintain our focus on environmental compliance improves our productivity, lowers our costs and helps us attract and retain our employees.

         Opportunistically pursue acquisitions that will create value and expand our core business.    We intend to pursue acquisition opportunities that are consistent with our business strategy and that we believe will create value for our shareholders. We may be unable to successfully integrate these acquired companies or realize the benefits we anticipate from an acquisition.

Coal Market Outlook

        Coal markets and coal prices are influenced by a number of factors and can vary significantly by region. Coal consumption in the U.S. and particularly from the PRB has been at historic highs, driven

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in recent periods by several market dynamics and trends, which may or may not continue, including the following:

         Continued strong demand in the U.S. steam coal market.    Domestic demand for steam coal continues to be strong, driven primarily by growth in electricity demand, which is expected to increase at an average annual rate of 1.1% from 2007 through 2020, according to the EIA (which assumes no future federal or state carbon emissions legislation is enacted and assumes a significant number of additional coal-fired power plants will be built during the period). In recent months, there has been a slow down in electricity demand due to recent market conditions. An increase in the number of new power plants plus increased utilization rates by existing power plants are projected by the EIA to be the key drivers of demand. However, a smaller number of plants than projected may be built and existing plants may not be able to significantly increase capacity or utilization rates.

         Increased international demand, growing export market and increased demand from U.S. steel market.    International demand for coal continues to be driven by rapid growth in electrical power generation capacity in Asia, particularly in China and India. China and India represented approximately 44% of total world coal consumption in 2005 and are expected to account for approximately 50% by 2030, according to the EIA. During the first half of 2008, there was also a surge in demand for U.S. coal in Europe. Additionally, demand for metallurgical coal needed to produce steel has continued to increase. This demand is diverting coal that could be sold as steam coal into the metallurgical coal market. We expect to the extent that the capabilities for shipping large volumes of western U.S. coal to eastern U.S. markets continue to improve, PRB coal may increasingly be substituted for eastern U.S. coal, which is currently in short supply due to increased export demand and production constraints. Decreased international demand for coal or, alternatively, increased international supply of coal could adversely affect the U.S. export market and the potential use of PRB coal as a substitute in other U.S. markets.

         Changes in U.S. regional production.    Coal production in the eastern U.S., other than the Illinois Basin, has declined in recent years because of production difficulties, reserve degradation and difficulties acquiring permits needed to conduct mining operations. Shortages and decreases in supply in the eastern U.S., including due to increasing demand in the foreign markets, continue to affect pricing in the eastern U.S.

         Coal remains a cost-competitive energy source relative to alternative fossil fuels and other alternative energy sources.    Coal continues to be a low cost source of energy relative to its substitutes because of the high prices for alternative fossil fuels. Coal also has a lower all-in cost relative to other alternative energy sources, such as nuclear, hydroelectric, wind and solar power. PRB coal in particular remains a cost-competitive energy source because it exists in greater abundance and is easier and cheaper to mine than coal produced in other regions. Changes in the prices for other fossil fuels or alternative energy sources in the future could affect the price of, and demand for, coal.

         Increased prices for PRB coal.    Although U.S. coal markets have recently experienced significant volatility, spot prices for PRB coal have more than doubled from $6.15 to $14.65 per ton for 8,800 Btu coal from January 2005 to September 2008. However, prices in September 2008 are down from a high of $15.75 in June 2008. Market prices for 8,800 Btu coal we have received recently reached more than $20/ton for deliveries in 2010. The prices for alternative fossil fuels, such as oil and natural gas, have been at historic highs in recent periods, and future changes in the prices for these fossil fuels may affect the price of coal. For example, recent declines in oil prices from historic highs may impact the price of coal. See "Risk Factors—Coal prices are subject to change and a substantial or extended decline in prices could materially and adversely affect our revenues and results of operations, as well as the value of our coal reserves."

         Increasingly Stringent Air Quality Regulations.    A series of more stringent requirements relating to particulate matter, ozone, haze, mercury, sulfur dioxide, nitrogen oxide, and other air pollutants have

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been proposed and/or enacted by federal and/or state regulatory authorities in recent years. As a result of some of these regulations, increased demand for western U.S. coal has occurred as coal-fired electricity producers have switched from bituminous coal to lower sulfur sub-bituminous coal. The PRB has benefited from this switching and its market share has increased accordingly. However, increasingly stringent air regulations may lead some coal-fired plants to install additional pollution control equipment, such as scrubbers, thereby reducing the need for low sulfur coal. Considerable uncertainty is associated with these air emission regulations, a few of which, including the Clean Air Interstate Rule, or CAIR, and the Clean Air Mercury Rule, or CAMR, have been vacated by the U.S. Court of Appeals for the District of Columbia. As a result, it is not possible to determine the impact of such regulatory initiatives on coal demand nationwide but they could be material. See "Risk Factors—Extensive environmental regulations, including existing and potential future regulatory requirements relating to air emissions, affect our customers and could reduce the demand for coal as a fuel source and cause coal prices and sales of our coal to materially decline," "—Because we produce and sell coal with a low sulfur content, a reduction in the price of sulfur dioxide emission allowances or increased use of technologies to reduce sulfur dioxide emissions could materially and adversely affect the demand for our coal and our results of operations" and "Environmental and Other Regulatory Matters."

        See "The Coal Industry" and "The Coal Industry—Special Note Regarding EIA Market Data and Projections."

Our Corporate History

        Rio Tinto Energy America Inc., or RTEA, is considered to be our predecessor for accounting purposes and its consolidated financial statements are our historical consolidated financial statements. The Rio Tinto Group initially formed RTEA in 1993 as Kennecott Coal Company in connection with the acquisitions of Northern Energy Resource Company, Inc., or NERCO and the Spring Creek coal mine, the Antelope coal mine and a 50% interest in the Decker coal mine operated by a third-party mine operator. In 1993, Kennecott Coal Company also acquired the Cordero coal mine from Elk River Resources, Inc., and in 1997, it acquired the Caballo Rojo coal mine from the Drummond Company. These mines are currently operated together as the Cordero Rojo coal mine. In 1994, Kennecott Coal Company was renamed Kennecott Energy and Coal Company. Also in 1994, Kennecott Energy and Coal Company acquired the Colowyo coal mine in Colorado from the W.R. Grace Company. The Colowyo coal mine will not be transferred to Cloud Peak Energy in connection with this offering. In 1998, Kennecott Energy and Coal Company acquired the Jacobs Ranch coal mine from the Kerr-McGee Corporation. In 2006, Kennecott Energy and Coal Company was renamed Rio Tinto Energy America Inc., as part of Rio Tinto's global branding initiative.

        Through a series of transactions, Rio Tinto America has separated certain Colorado-based coal, certain non-coal and other U.S. assets from its western U.S. coal business. RTEA and Rio Tinto Energy America Services Company, or RTEASC, currently own and operate Rio Tinto America's western U.S. coal business except for the Colowyo coal mine in Colorado. Due to the terms, conditions and other restrictions contained in the existing financing arrangements with respect to the Colowyo mine, the Colowyo mine will not be transferred to Cloud Peak Energy.

        See "Separation Transactions and Related Agreements" for additional information regarding these transactions.

Company Information

        Our principal executive office is currently located at 505 S. Gillette Avenue, Gillette, Wyoming 82718, and our telephone number at that address is (307) 687-6000. Following the completion of this offering, we intend to maintain a website at www.cloudpeakenergy.com. The information that will be contained on, or that will be accessible through, our website is not part of this prospectus.

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        Cloud Peak Energy and the Cloud Peak Energy logo are trademarks and service marks of Cloud Peak Energy Inc. All other trademarks, service marks or trade names appearing in this prospectus are owned by their respective holders.

Presentation of Our Coal Data and Pro Forma Consolidated Financial Information and Coal Market Data

Our Historical Financial Information

        Unless otherwise indicated, historical references contained in this prospectus in "—Summary Actual and Pro Forma Consolidated Financial Data," "Selected Consolidated Financial and Operating Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations," and our historical consolidated financial statements contained elsewhere in this prospectus, relate to RTEA and include results from the Colowyo mine and the uranium mining venture, which will not be transferred to Cloud Peak Energy in connection with this offering.

Pro Forma Financial Information

        When we refer to our pro forma financial information we are giving effect to:

•

the separation of the Colowyo coal mine entities and the uranium property entities from RTEA, which will not be transferred to Cloud Peak Energy;



•

the separation transactions and related adjustments that will occur in connection with this offering to separate us from Rio Tinto America;



•

the $            term loan, the $            revolving credit facility and the $            senior notes, all of which we intend to enter into in connection with this offering, which we refer to as the debt financing transactions;



•

the issuance of our Series A Preferred Stock; and



•

the issuance of the shares of our common stock in this offering.

Our Coal Data

        References to our coal production, sales and purchases and our reserves, contained in this prospectus in "Prospectus Summary," "The Coal Industry" and "Business," unless otherwise indicated, exclude the Colowyo mine and the uranium mining venture which will not be transferred to Cloud Peak Energy in connection with this offering.

        References contained in this prospectus to tons of coal controlled by us as of September 30, 2008 give effect to our coal sales since December 31, 2007.

        References to BLM estimates are given as of the date we acquired the lease for the related LBA tract.

        Through our indirect, wholly-owned subsidiary, we currently hold a 50% interest in the Decker mine in Montana through a joint-venture agreement with an indirect, wholly-owned subsidiary of Level 3 Communications, Inc., or Level 3. The Decker mine is managed by a third-party mine operator. Information related to our coal production, reserves, purchases and revenues, contained in this prospectus and information in our consolidated financial statements contained elsewhere in this prospectus, unless otherwise indicated, includes amounts reflecting our 50% interest in the Decker mine.

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Coal Market Data

        Market data used in this prospectus has been obtained from governmental and independent industry sources and publications, such as the U.S. Energy Information Administration, or EIA, the National Mining Association, or NMA, and the Mine Safety and Health Administration, or MSHA, and, unless otherwise indicated, is based on data and reports published in 2007 or 2008 but may relate to prior years. We have not independently verified the data obtained from these sources and we cannot assure you of the accuracy or completeness of the data. In addition, industry projections of the EIA are subject to numerous assumptions and methodologies chosen by the EIA, including that laws and regulations in effect at the time of the projections remain unchanged and that future federal or state carbon emissions legislation has not been enacted. Forward-looking information obtained from these sources is subject to the same qualifications and the additional uncertainties regarding the other forward-looking statements contained in this prospectus. See "Special Note Regarding Forward-Looking Statements" and "The Coal Industry—Special Note Regarding EIA Market Data and Projections."

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The Offering

        Unless otherwise indicated, all information in this prospectus:

•

reflects the consummation of the separation transactions described in "Separation Transactions and Related Agreements";



•

assumes an initial public offering of our shares of common stock at a price of $      per share, the midpoint of the estimated public offering price range set forth on the cover page of this prospectus;



•

assumes no conversion of our Series A Preferred Stock;



•

excludes the            shares of our common stock to be reserved for issuance under our employee benefits plans to be in effect after the offering;



•

assumes no exercise by the underwriters of their right to purchase a maximum of            additional shares of common stock from Rio Tinto America to cover over-allotments of shares; and



•

includes approximately            shares of our common stock to be issued to our directors and employees concurrently with this offering.

        Depending on market conditions at the time of pricing of this offering and other considerations, Rio Tinto America may sell fewer or more shares than the number set forth on the cover page of this prospectus and may sell fewer or more shares in the concurrent offering.

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SUMMARY ACTUAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA

        The following table provides a summary of our actual and pro forma consolidated financial data for the periods indicated. This information should be read in conjunction with the sections of this prospectus entitled "Selected Consolidated Financial and Operating Data," "Management's Discussion and Analysis of Financial Condition and Results from Operations," and our historical consolidated and unaudited pro forma consolidated financial information and related notes thereto included elsewhere in this prospectus.

        RTEA is considered to be our predecessor for accounting purposes and its consolidated financial statements are our historical consolidated financial statements. Our historical consolidated financial statements include financial information for certain operations that will not be transferred to Cloud Peak Energy in connection with this offering, including the Colowyo coal mine which represented 8.9% of our revenues for the year ended December 31, 2007. As a result, our historical consolidated financial statements are not comparable to the unaudited pro forma consolidated financial information included elsewhere in this prospectus or to the results investors should expect after the offering. To date, Cloud Peak Energy Inc. has had no operations. As described in "Separation Transactions and Related Agreements," through a merger transaction RTEA, our predecessor, and RTEASC, an indirect wholly owned subsidiary of Rio Tinto, will become our wholly owned subsidiaries. The consolidated financial statements of RTEA are provided elsewhere in this prospectus.

        We have derived the actual consolidated financial data as of December 31, 2006 and 2007 and for each of the three years in the period ended December 31, 2007 from the audited consolidated financial statements of RTEA, included elsewhere in this prospectus. We have derived the actual consolidated financial data as of December 31, 2005 from the unaudited consolidated financial data of RTEA, not included in this prospectus. We have derived the actual consolidated financial data as of June 30, 2008 and for the six months ended June 30, 2007 and 2008 from the unaudited consolidated financial statements of RTEA, included elsewhere in this prospectus. The unaudited consolidated financial information was prepared on a basis consistent with that used in preparing our audited consolidated financial statements and includes all adjustments, consisting of normal and recurring items, that we consider necessary for a fair presentation of the financial position and results of operations for the unaudited periods. The interim results of operations are not necessarily indicative of operations for a full fiscal year.

        Prior to the consummation of the offering, our consolidated financial statements were prepared on a carve-out basis from our ultimate parent company, Rio Tinto and its subsidiaries. The carve-out consolidated financial statements include allocations of corporate, general and administrative expenses and Rio Tinto headquarters overhead expenses. We do not expect to continue to incur some of these charges as a stand-alone public company. These allocations were based upon various assumptions and estimates and actual results may differ from these allocations, assumptions and estimates. However, the carve-out consolidated financial statements do not reflect additional expenses we expect to incur as a stand-alone public company. Accordingly, the carve-out consolidated financial statements should not be relied upon as being representative of our financial position or operating results had we operated on a stand-alone basis, nor are they representative of our financial position or operating results following the offering.

        We have derived the unaudited pro forma consolidated financial data as of June 30, 2008 and for the year ended December 31, 2007 and for the six months ended June 30, 2008, from the unaudited pro forma consolidated financial information, included elsewhere in this prospectus. See "Unaudited Pro Forma Consolidated Financial Information." The unaudited pro forma consolidated financial information is based on our actual consolidated financial statements, included elsewhere in this prospectus. The unaudited pro forma adjustments are based on available information and certain assumptions that we believe are reasonable and are described below in the accompanying notes. The

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unaudited pro forma consolidated balance sheet as of June 30, 2008 and the unaudited pro forma consolidated statements of operations for the year ended December 31, 2007 and for the six months ended June 30, 2008 are presented on a pro forma basis to give effect, in each case, to the following adjustments as if they occurred on June 30, 2008 for balance sheet adjustments and January 1, 2007 for statement of operations adjustments:

•

the separation of the Colowyo coal mine entities and the uranium property entities from RTEA, which will not be transferred to Cloud Peak Energy;



•

the separation transactions and related adjustments that will occur in connection with this offering to separate us from Rio Tinto America;



•

the debt financing transactions;



•

the issuance of our Series A Preferred Stock; and



•

the issuance of the shares of our common stock in this offering.

        The unaudited pro forma consolidated financial data is for informational purposes only, and is not intended to represent what our results of operations would be after giving effect to the offering, or to indicate our results of operations for any future period. Therefore, investors should not place undue reliance on the unaudited pro forma consolidated financial data.

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Summary Unaudited Pro Forma Consolidated Financial Data
(dollars in thousands, except share amounts)

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Summary Actual Consolidated Financial Data
(dollars in thousands, except share amounts)

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(1)

Freight revenues accounted for 4.9%, 3.9% and 4.0% of our total revenues for the years ended December 31, 2005, 2006 and 2007, respectively, and 4.0% and 5.5% of our total revenues for the six months ended June 30, 2007 and 2008, respectively. As a general matter, our customers pay their own freight costs. We pay the freight costs, however, for shipping coal to some of our customers and in these cases the customers pay us in respect of these freight costs and the payments are included in our revenues. See Note 3 of Notes to Consolidated Financial Statements.

(2)

Primarily reflects amortization under our brokerage contract related to the Spring Creek mine.

(3)

Includes corporate allocations of general and administrative costs from Rio Tinto and its subsidiaries of $8.1 million, $11.4 million and $13.2 million for the years ended December 31, 2005, 2006 and 2007, respectively, and $5.6 million and $6.9 million for the six months ended June 30, 2007 and 2008, respectively, and allocations of Rio Tinto headquarters overhead costs of $7.9 million, $6.9 million and $10.4 million for the years ended December 31, 2005, 2006 and 2007, respectively, and $5.2 million and $5.2 million for the six months ended June 30, 2007 and 2008, respectively. The amounts for the six months ended June 30, 2008 also include $10.2 million of costs associated with an initiative to prepare for our initial public offering.

(4)

Asset impairment charges for the year ended December 31, 2007 reflects non-recurring capitalized cost of an abandoned enterprise resource planning, or ERP, systems implementation. The ERP systems implementation was a worldwide Rio Tinto initiative designed to align processes, procedures, practices and reporting across all Rio Tinto business units. The implementation would have taken our stand-alone ERP system and moved it to a shared Rio Tinto platform, which could not be transferred to a new stand-alone company. We do not currently use, and will not use following this offering, this ERP system.

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(5)

Total long-term debt includes the current and long-term portions of the long-term debt-bonds, long-term debt-related party and long-term debt-other.

(6)

Pro forma EBITDA is derived from the Unaudited pro forma consolidated statement of operations for the year ended December 31, 2007 and six months ended June 30, 2008, included elsewhere in this prospectus. A reconciliation of pro forma EBITDA to pro forma net income for the periods presented, is as follows:

    See Note 9 below for a discussion of our use of EBITDA.

(7)

Pro forma adjusted EBITDA is defined as pro forma EBITDA as adjusted for the impact of             .

    A reconciliation of pro forma adjusted EBITDA to pro forma EBITDA for the periods presented, is as follows:

(8)

Tons of coal sold includes amounts sold under our brokerage contract relating to the Spring Creek mine.

(9)

EBITDA, a performance measure used by management, is defined as net income (loss) plus: interest expense (net of interest income), income tax provision, depreciation and depletion, amortization and accretion as shown in the table below. EBITDA, as presented for the years ended December 31, 2005, 2006 and 2007 and for the six months ended June 30, 2007 and 2008, is not defined under accounting principles generally accepted in the United States of America, or U.S. GAAP, and does not purport to be an alternative to net income as a measure of operating performance. Because not all companies use identical calculations, this presentation of EBITDA may not be comparable to other similarly-titled measures of other companies. We use, and we believe investors benefit from the presentation of, EBITDA in evaluating our operating performance because it provides us and our investors with an additional tool to compare our operating performance on a consistent basis by removing the impact of certain items that

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management believes do not directly reflect our core operations. We believe that EBITDA is useful to investors and other external users of our consolidated financial statements in evaluating our operating performance because EBITDA is widely used by investors to measure a company's operating performance without regard to items such as interest expense, taxes, depreciation and depletion, amortization and accretion, which can vary substantially from company to company depending upon accounting methods and book value of assets and liabilities, capital structure and the method by which assets were acquired.

However, using EBITDA as a performance measure has material limitations as compared to net income, or other financial measures as defined under U.S. GAAP, as it excludes certain recurring items which may be meaningful to investors. EBITDA excludes interest expense or interest income; however, as we have historically borrowed money from our parent in order to finance transactions and operations, or invested available cash to generate interest income, interest expense and interest income are elements of our cost structure and ability to generate revenue and returns for shareholders. Further, EBITDA excludes depreciation and depletion and amortization; however, as we use capital and intangible assets to generate revenues, depreciation and depletion, as well as amortization are a necessary element of our costs and ability to generate revenue. EBITDA also excludes accretion expense; however, as we are legally obligated to pay for costs associated with the reclamation and closure of our mine sites, the periodic accretion expense relating to these reclamation costs is a necessary element of our costs and ability to generate revenue. Finally, EBITDA excludes income taxes; however, as we are organized as a corporation, the payment of taxes is a necessary element of our operations. As a result of these exclusions from EBITDA, any measure that excludes interest expense, interest income, depreciation and depletion, amortization, accretion and income taxes has material limitations as compared to net income. When using EBITDA as a performance measure, management compensates for these limitations by comparing EBITDA to net income in each period, so as to allow for the comparison of the performance of the underlying core operations with the overall performance of the company on a full-cost, after-tax basis. Using both EBITDA and net income to evaluate the business allows management and investors to (a) assess our relative performance against our competitors and (b) ultimately monitor our capacity to generate returns for shareholders.

A reconciliation of EBITDA to net income for each of the periods presented is as follows:

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(10)

Adjusted EBITDA is defined as EBITDA plus:            as shown in the table below:

(11)

For the years ended December 31, 2005, 2006 and 2007 and for the six months ended June 30, 2007 and 2008, tons of coal produced, tons of coal purchased for resale and tons of coal sold, includes the Colowyo coal mine, as it was consolidated into our historical consolidated financial statements, as explained above.

(12)

Tons of coal produced, tons of coal purchased for resale and tons of coal sold, on a pro forma basis, exclude activities from the Colowyo mine.

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RISK FACTORS

        You should carefully consider the risk factors described below and all other information contained in this prospectus before you decide to invest in our common stock. If any of the following risk factors, as well as other risks and uncertainties that are not currently known to us or that we currently believe are not material, actually occur, our business, financial condition and results of operations could be materially and adversely affected. Accordingly, the trading price of our securities could decline, and you may lose part or all of your investment.

Risks Related to Our Business

Coal prices are subject to change and a substantial or extended decline in prices could materially and adversely affect our revenues and results of operations, as well as the value of our coal reserves.

        Our revenues and results of operations and the value of our coal reserves are dependent in large measure upon the prices we receive for our coal. Because coal is a commodity, the prices we receive are set by the marketplace. Prices for coal generally tend to be cyclical, and U.S. prices are currently near highs relative to historical prices. The contract prices we may receive in the future for coal depend upon numerous factors beyond our control, including:

•

the domestic and foreign supply and demand for coal;



•

the quantity and quality of coal available from competitors;



•

competition for production of electricity from non-coal sources, including the price and availability of alternative fuels, such as natural gas and oil, and alternative energy sources, such as nuclear, hydroelectric, wind and solar power;



•

domestic air emission standards for coal-fired power plants, and the ability of coal-fired power plants to meet these standards by installing scrubbers or other means;



•

adverse weather, climatic or other natural conditions, including natural disasters;



•

domestic and foreign economic conditions, including economic slowdowns;



•

legislative, regulatory and judicial developments, environmental regulatory changes, or changes in energy policy and energy conservation measures that would adversely affect the coal industry, such as legislation limiting carbon emissions or providing for increased funding and incentives for alternative energy sources;



•

the capacity of, cost of, and proximity to, rail transportation facilities and rail transportation delays; and



•

market price fluctuations for sulfur dioxide emission allowances.

        A substantial or extended decline in the prices we receive for our future coal sales contracts could materially and adversely affect us by decreasing our revenues thereby materially and adversely affecting our results of operations.

Our coal mining operations are subject to operating risks that are beyond our control, which could result in materially increased operating expenses and decreased production levels and could materially and adversely affect our results of operations.

        We mine coal at surface mining operations located in Wyoming and Montana. Our coal mining operations are subject to conditions or events beyond our control. Because we maintain very little produced coal inventory, these conditions or events could disrupt operations, adversely affect production and shipments and increase the cost of mining at particular mines for varying lengths of

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time, which could have a material adverse effect on our results of operations. These conditions and events include, among others:

•

poor mining conditions resulting from geological, hydrologic or other conditions, which may cause instability of highwalls or spoil-piles or cause damage to nearby infrastructure;



•

mining and plant equipment failures and unexpected maintenance problems;



•

adverse weather and natural disasters, such as heavy rains, flooding and other natural events affecting operations, transportation or customers;



•

the unavailability of qualified labor and contractors;



•

the unavailability of raw materials, equipment (including heavy mobile equipment) or other critical supplies such as tires and explosives, fuel, lubricants and other consumables of the type, quantity and/or size needed to meet production expectations;



•

the capacity of, and proximity to, rail transportation facilities and rail transportation delays or interruptions, including derailments;



•

delays, challenges to, and difficulties in acquiring, maintaining or renewing necessary permits, including environmental permits, or mining or surface rights;



•

delays or difficulties in, the unavailability of, or unexpected increases in the cost of acquiring, developing and permitting new LBA acquisitions from the federal government and other new mining reserves and surface rights;



•

competition and/or conflicts with other natural resource extraction activities and production within our operating areas, such as coalbed methane extraction or oil and gas development;



•

a major incident at the mine site that causes all or part of the operations of a mine to cease for some period of time;



•

new health, safety and environmental regulations or other changes in interpretations of current regulations, including the classification of plant and animal species near our mines, including the potential listing of the sage grouse, as endangered or threatened species;



•

inability to acquire adequate financial sureties for mining and reclamation purposes or to meet other governmental or private bonding requirements; and



•

the value of the U.S. dollar relative to other currencies, particularly where imported products are required for the mining process, such as tires and petroleum products.

        These changes, conditions and events may materially increase our cost of mining and delay or halt production at particular mines either permanently or for varying lengths of time.

Competition within the coal production industry and with producers of competing energy sources may materially and adversely affect our ability to sell coal at a favorable price.

        We compete with numerous other coal producers in various regions of the U.S. for domestic sales. International demand for U.S. coal also affects competition within our industry. The demand for U.S. coal exports depends upon a number of factors outside of our control, including the overall demand for electricity in foreign markets, currency exchange rates, ocean freight rates, port and shipping capacity, the demand for foreign-produced steel, both in foreign markets and in the U.S. market, general economic conditions in foreign countries, technological developments and environmental and other governmental regulations. Foreign demand for eastern U.S. coal has increased in recent periods. If foreign demand for U.S. coal were to decline, this decline could cause competition among coal

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producers for sales in the U.S. to intensify, potentially resulting in significant downward pressure on domestic coal prices, including in the PRB.

        In addition to competing with other coal producers, we compete generally with producers of other fuels, such as natural gas and oil. Prices for competing fuels are currently at historically high levels. A decline in price for these fuels, could cause demand for coal to decrease and adversely affect the price of our coal. If alternative energy sources, such as wind or solar, become more cost-competitive on an overall basis, including capital expenditures, and conversion, storage and transmission costs, demand for coal could decrease and the price of coal could be materially and adversely affected, including in the PRB.

Excess production and production capacity in the coal production industry could put downward pressure on coal prices and, as a result, materially and adversely affect our revenues and profitability.

        During the mid-1970s and early 1980s, increased demand for coal attracted new investors to the coal industry in the PRB, spurred the development of new mines and resulted in additional production capacity throughout the industry, all of which led to increased competition and lower coal prices. Recent increases in coal prices have encouraged the development of expanded capacity by coal producers and may continue to do so. Any resulting overcapacity and increased production could materially reduce coal prices and therefore materially reduce our revenues and profitability.

Decreases in demand for electricity resulting from economic, weather changes or other conditions could adversely affect coal prices and materially and adversely affect our results of operations.

        Our coal is primarily used as fuel for electricity generation. Overall economic activity and the associated demands for power by industrial users can have significant effects on overall electricity demand. An economic slowdown can significantly slow the growth of electrical demand and could result in contraction of demand for coal. Declines in international prices for coal generally will impact U.S. prices for coal. Current international demand for coal is being driven, in significant part, by increased demand due to economic growth in China and India as well as other developing countries. We cannot assure you that this growth will continue.

        Weather patterns can also greatly affect electricity demand. Extreme temperatures, both hot and cold, cause increased power usage and, therefore, increased generating requirements from all sources. Mild temperatures, on the other hand, result in lower electrical demand, which allows generators to choose the sources of power generation when deciding which generation sources to dispatch. Any downward pressure on coal prices, due to decreases in overall demand or otherwise, including changes in weather patterns, would materially and adversely affect our results of operations.

The use of alternative energy sources for power generation could reduce coal consumption by U.S. electric power generators, which could result in lower prices for our coal, which could reduce our revenues and materially and adversely affect our business and results of operations.

        In 2007, approximately 94% of our coal sales were to domestic electric power generators. Domestic electric power generation accounted for approximately 93% of all U.S. coal consumption in 2007, according to the EIA. The amount of coal consumed for U.S. electric power generation is affected by, among other things:

•

the location, availability, quality and price of alternative energy sources for power generation, such as natural gas, fuel oil, nuclear, hydroelectric, wind and solar power; and



•

technological developments, including those related to alternative energy sources.

        Gas-fired generation has the potential to displace coal-fired generation, particularly from older, less efficient coal-powered generators. We expect that many of the new power plants needed to meet

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increasing demand for electricity generation will be fired by natural gas because gas-fired plants are cheaper to construct and permits to construct these plants are easier to obtain as natural gas is seen as having a lower environmental impact than coal-fired generators. In addition, state and federal mandates for increased use of electricity from renewable energy sources could have an impact on the market for our coal. More than twenty states have enacted legislative mandates requiring electricity suppliers to use renewable energy sources to generate a certain percentage of power. There have been numerous proposals to establish a similar uniform, national standard although none of these proposals have been enacted to date. Possible advances in technologies and incentives, such as tax credits, to enhance the economics of renewable energy sources could make these sources more competitive with coal. Any reduction in the amount of coal consumed by North American electric power generators could reduce the price of coal that we mine and sell, thereby reducing our revenues and materially and adversely affecting our business and results of operations.

If we are unable to acquire or develop additional coal reserves that are economically recoverable, our profitability and future success and growth may be materially and adversely affected.

        Our profitability depends substantially on our ability to mine, in a cost-effective manner, coal reserves that possess the quality characteristics desired by our customers. Because our reserves decline as we mine our coal, our future success and growth depend upon our ability to acquire additional coal that is economically recoverable. If we fail to acquire or develop additional reserves, our existing reserves will eventually be depleted. For example, due to certain of Decker's identified non-reserve coal deposits being currently uneconomical to develop, the Decker management committee has approved plans to reduce mining rates and close the Decker mine at the end of 2012. As a result, to maintain market share and our competitive position, we will need to acquire significant additional coal through the federal competitive leasing process that can be mined on an economically recoverable basis. We also lease a smaller portion of our reserves from the states of Montana and Wyoming and from private third parties. See "—Because most of the coal in the vicinity of our mines is owned by the U.S. federal government, our future success and growth could be materially and adversely affected if we are unable to acquire additional reserves through the federal competitive leasing process" and "—We may be unable to acquire state leases for coal reserves in the State of Wyoming, or to do so on a cost-effective basis, which could materially and adversely affect our business strategy and growth plans."

        Our ability to obtain additional coal reserves in the future could also be limited by the availability of cash we generate from our operations or available financing, restrictions under our credit arrangements, competition from other coal companies for properties, the lack of suitable acquisition or LBA opportunities or the inability to acquire coal properties or LBAs on commercially reasonable terms. In addition, we may not be able to mine future reserves as profitably as we do at our current operations.

Because most of the coal in the vicinity of our mines is owned by the U.S. federal government, our future success and growth could be materially and adversely affected if we are unable to acquire additional reserves through the federal competitive leasing process.

        Most of the coal in the vicinity of our mines is owned by the U.S. federal government. Accordingly, the LBA process is the most significant means of acquiring additional reserves. There is no requirement that the federal government lease coal subject to an LBA, lease its coal at all or give preference to any LBA applicant. In the current coal pricing environment, LBAs are becoming increasingly more competitive and expensive to obtain, and the review process to submit an LBA for bid continues to lengthen. We expect that this trend may continue. The increasing size of potential LBA tracts may make it easier for new mining operators to enter the market on economical terms and may, therefore, increase competition for LBAs. Increased opposition from non-governmental organizations and other third parties may also lengthen, delay, or complicate the LBA process. In order

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to win a lease in the LBA process and acquire additional coal, our bid for a coal tract must meet or exceed the fair market value of the coal based on the internal estimates of the Bureau of Land Management, or BLM, which they do not publish. We have maintained a history of timely payments related to our LBAs. If we are unable to maintain our "good payor" status, we would be required to seek bonding for any remaining payments. If we are required to purchase bonding for lease obligations this would significantly increase our costs and materially and adversely affect our profitability. See "Business—Coal Reserves" for a more detailed description of the LBA process.

        The LBA process also requires us to acquire rights to mine from surface owners overlying the coal, and these rights are becoming increasingly more difficult and costly to acquire. Certain federal regulations provide a specific class of surface owners, also known as qualified surface owners, or QSOs, with the ability to prohibit the BLM from leasing its coal. If the land overlying a coal tract is owned by a QSO, federal laws prohibit us from leasing the coal tract without first securing surface rights to the land, or purchasing the surface rights from the QSO, which would allow us to conduct our mining operations. This right of QSOs allows them to exercise significant influence over negotiations to acquire surface rights and can delay the LBA process or ultimately prevent the acquisition of an LBA. If we are unable to successfully negotiate access rights with QSOs at a price and on terms acceptable to us, we may be unable to acquire LBAs for coal on land owned by the QSO. If the prices to acquire land owned by QSOs increase, it could materially and adversely affect our profitability.

We may be unable to acquire state leases for coal reserves in the State of Wyoming, or to do so on a cost-effective basis, which could materially and adversely affect our business strategy and growth plans.

        We acquire a small percentage of our reserves through state leasing processes. Not including the Decker mine, we typically lease approximately 10-12% of our reserves from state leases, the majority of which involve our Spring Creek mine. Nearly all of the state leases in Wyoming have already been acquired by various mining operations in the PRB, including ours. If, as part of our growth strategy, we desire to expand our operations into areas requiring state leases, we may be required to negotiate with competing Wyoming mining operations to acquire these reserves. If we are unable to do so on a cost-effective basis, our business strategy could be adversely affected. We do not typically acquire state leases in Montana significantly in advance of mining operations due to the complexity of the leasing process in Montana.

Conflicts of interest with competing holders of mineral rights could materially and adversely affect our ability to mine coal or do so on a cost-effective basis.

        In addition to federal coal leases through the competitive leasing process, the federal government also leases rights to other minerals such as coalbed methane, natural gas and oil reserves in the western U.S., including in the PRB. Some of these minerals are located on, or are adjacent to, some of our coal reserves and LBA areas, potentially creating conflicting interests between us and the lessees of those interests. In addition, from time to time we acquire these minerals ourselves to prevent conflicting interests from arising. If, however, conflicting interests arise and we do not acquire the competing mineral rights, we may be required to negotiate our ability to mine with the holder of the competing mineral rights. If we are unable to reach an agreement with these holders, or do so on a cost-effective basis, we may incur increased costs, our ability to mine could be impaired and our business and results of operations could be materially and adversely affected.

Inaccuracies in our estimates of our coal reserves could result in decreased profitability from lower than expected revenues or higher than expected costs.

        Our future performance depends on, among other things, the accuracy of our estimates of our proven and probable coal reserves. We base our estimates of reserves on engineering, economic and

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geological data assembled and analyzed by our internal engineers. In connection with this offering, these estimates were reviewed by John T. Boyd Company, mining and geological consultants, for the year ended December 31, 2007. Non-reserve coal deposit estimates related to our April 2008 LBA were estimated by the BLM and have not been independently reviewed or verified. The amount of non-reserve coal deposits on this LBA, and additional LBAs we may acquire, or contained in our non-reserve coal deposits may be less than the stated estimates. Coal acquired through the LBA process is not included as proven or probable coal reserves unless assessed by our staff of geologists and engineers to verify that such classification is appropriate. Our estimates of proven and probable coal reserves as to both quantity and quality are updated annually to reflect the production of coal from the reserves, updated geological models and mining recovery data, the tonnage contained in new lease areas acquired and estimated costs of production and sales prices. There are numerous factors and assumptions inherent in estimating the quantities and qualities of, and costs to mine, coal reserves, including many factors beyond our control, any one of which may vary considerably from actual results. These factors and assumptions include:

•

quality of the coal;



•

geological and mining conditions, which may not be fully identified by available exploration data and/or may differ from our experiences in areas where we currently mine;



•

the percentage of coal ultimately recoverable;



•

the assumed effects of regulation, including the issuance of required permits, and taxes, including severance and excise taxes and royalties, and other payments to governmental agencies;



•

assumptions concerning the timing for the development of the reserves; and



•

assumptions concerning equipment and productivity, future coal prices, operating costs, including for critical supplies such as fuel, tires and explosives, capital expenditures and development and reclamation costs.

        As a result, estimates of the quantities and qualities of economically recoverable coal attributable to any particular group of properties, classifications of reserves based on risk of recovery, estimated cost of production, and estimates of future net cash flows expected from these properties as prepared by different engineers, or by the same engineers at different times, may vary materially due to changes in the above factors and assumptions. Actual production recovered from identified reserve areas and properties, and revenues and expenditures associated with our mining operations, may vary materially from estimates. Any inaccuracy in our estimates related to our reserves could result in decreased profitability from lower than expected revenues and/or higher than expected costs.

Our business requires substantial capital investment and maintenance expenditures, which we may be unable to provide, and our cost of capital will be higher as a stand-alone company.

        Our business plan and strategy are dependent upon our acquisitions of additional reserves, which require substantial capital expenditures. We also require capital for, among other purposes, acquisition of surface rights, equipment and the development of our mining operations, capital renovations, maintenance and expansions of plants and equipment and compliance with environmental laws and regulations. As part of the Rio Tinto Group, our operations and growth have been funded in large part through capital investments by Rio Tinto America. Upon completion of this offering, we will be an independent company and we will no longer have access to capital from Rio Tinto America or be able to take advantage of the borrowing capacity, assets and consolidated investment grade credit rating of Rio Tinto.

        We will need to develop and maintain our own sources of capital and establish and maintain our own credit rating. On a stand-alone basis, our credit rating will not be investment grade and we will

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have a higher cost of capital. To the extent that cash generated internally and cash available under our future credit arrangements are not sufficient to fund capital requirements, we will require additional debt and/or equity financing. Debt or equity financing may not be available or, if available, may not be available on satisfactory terms. If we are unable to obtain additional capital, we will not be able to maintain or increase our existing production rates and we could be forced to reduce or delay capital expenditures or change our business strategy, sell assets or restructure or refinance our indebtedness, all of which could have a material adverse effect on our business or financial condition.

Our ability to collect payments from our customers could be impaired if their creditworthiness deteriorates.

        We have contracts to supply coal to energy trading and brokering companies under which they purchase the coal for their own account or resell the coal to end users. Our ability to receive payment for coal sold and delivered depends on the continued creditworthiness of our customers. If we determine that a customer is not creditworthy, we may not be required to deliver coal under the customer's coal sales contract. If this occurs, we may decide to sell the customer's coal on the spot market, which may be at prices lower than the contracted price, or we may be unable to sell the coal at all. Furthermore, the bankruptcy of any of our customers could materially and adversely affect our financial position. In addition, our customer base may change with deregulation as utilities sell their power plants to their non-regulated affiliates or third parties that may be less creditworthy, thereby increasing the risk we bear for customer payment default. These new power plant owners may have credit ratings that are below investment grade, or may become below investment grade after we enter into contracts with them. In addition, competition with other coal suppliers could force us to extend credit to customers and on terms that could increase the risk of payment default.

Our indebtedness could adversely affect our results of operations and financial condition and prevent us from fulfilling our financial obligations.

        As of June 30, 2008, we had approximately $647.9 million of outstanding amounts owed to the Rio Tinto Group including $541.9 million under our revolving credit facility with Rio Tinto America. The debt owed under the revolving credit facility with Rio Tinto America was contributed to the capital of RTEA on September 24, 2008. Any remaining amounts will be contributed to the capital of RTEA immediately prior to this offering. In connection with this offering, we intend to enter into a new credit agreement and/or undertake other financing transactions with one or more lenders for approximately $                 million. Any outstanding indebtedness could have important consequences to us, such as:

•

limiting our ability to obtain additional financing to fund growth, such as new LBA acquisitions or other mergers and acquisitions, working capital, capital expenditures, debt service requirements or other cash requirements;



•

exposing us to the risk of increased interest costs if the underlying interest rates rise;



•

limiting our ability to invest operating cash flow in our business due to debt service requirements;



•

making it more difficult to obtain surety bonds or letters of credit;



•

limiting our ability to compete with companies that are not as leveraged and that may be better positioned to withstand economic downturns;



•

limiting our ability to acquire new coal reserves and/or plant and equipment needed to conduct operations; and



•

limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our business, the industry in which we operate and general economic and market conditions.

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        If we further increase our indebtedness, the related risks that we now face, including those described above, could intensify. In addition to the principal repayments on our outstanding debt, we have other demands on our cash resources, including capital expenditures and operating expenses. Our ability to pay our debt depends upon our operating performance. In particular, economic conditions could cause our revenues to decline, and hamper our ability to repay our indebtedness. If we do not have enough cash to satisfy our debt service obligations, we may be required to refinance all or part of our debt, sell assets or reduce our spending. We may not be able to, at any given time, refinance our debt or sell assets on terms acceptable to us or at all.

If we are unable to comply with the covenants or restrictions contained in our debt instruments, our lenders could declare all amounts outstanding under those instruments to be due and payable, which could materially and adversely affect our financial condition.

        Under our credit arrangements with Rio Tinto America we were not subject to covenants or other restrictions on our ability to operate our business. However, we expect our credit arrangements after this offering will contain covenants that, among other things, will restrict our ability to dispose of assets, incur additional indebtedness, pay dividends, create liens on assets, make investments, loans or advances, make acquisitions, engage in mergers or consolidations, and engage in certain transactions with affiliates. We also expect that our credit arrangements may require us to comply with various financial covenants that may be quite restrictive. As a cyclical business it may be difficult to comply with these financial covenants. These restrictions could limit our ability to plan for or react to market conditions or meet extraordinary capital needs or otherwise restrict corporate activities. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources After this Offering" for additional information regarding our credit arrangements.

        The breach of any of the covenants or restrictions unless cured within the applicable grace period, could result in a default under the debt instruments that would permit the lenders to declare all amounts outstanding to be due and payable, together with accrued and unpaid interest. In such an event, we may not have sufficient assets to repay such indebtedness. As a result, any default could have serious consequences to our financial condition.

Our ability to mine and ship coal is affected by adverse weather conditions, which could have an adverse effect on our revenues.

        Adverse weather conditions can impact our ability to mine and ship our coal and our customers' ability to take delivery of our coal. Lower than expected shipments by us during any period could have an adverse effect on our revenues. For example, in 2005, our volume of coal shipments was impacted by severe heavy rain, which reduced the capacity of the railroads by which our customers contract to transport coal from our mines. In addition, severe weather, including droughts and dust, may affect our ability to conduct our mining operations.

If our highwalls or spoil-piles fail, our mining operations and ability to ship our coal could be impaired and our results of operations could be materially and adversely affected.

        Our operations could be adversely affected and we may be unable to produce coal if our highwalls fail due to conditions which may include geological abnormalities, poor ground conditions, water or blasting shocks, among others. In addition to making it difficult and more costly to recover coal, a highwall failure could also damage adjacent infrastructure such as roads, power lines, railways and gas pipelines. Further, in-pit spoil failure due to conditions such as material type, water ingress, floor angle, floor roughness, spoil volume or otherwise, can impact coal removal, reduce coal recovery, increase our costs, or interrupt our production and shipments. Highwall and spoil-pile failures could materially and adversely affect our operations thereby reducing our profitability.

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Major equipment and plant failures could reduce our ability to produce and ship coal and materially and adversely affect our results of operations.

        We depend on several major pieces of equipment and plant to produce and ship our coal, including draglines, shovels, coal crushing plant, critical conveyors, major transformers and coal silos. If any of these pieces of equipment or plant suffered major damage or were destroyed by fire, abnormal wear, flooding, incorrect operation, damage from highwall or spoil-pile failures, or otherwise, we may be unable to replace or repair them in a timely manner or at a reasonable cost which would impact our ability to produce and ship coal and materially and adversely affect our results of operations.

Significant increases in the royalty and production taxes we pay on the coal we produce could materially and adversely affect our results of operations.

        We pay federal, state and private royalties and federal, state and county production taxes on the coal we produce. A substantial portion of our royalties and production taxes are levied as a percentage of gross revenues with the remaining levied on a per ton basis. For example, we pay production royalties of 12.5% of gross revenues to the federal government. In 2007, we incurred royalties and production taxes which represented 29.0% of revenues from the coal we produced (including Colowyo). If the royalty and production tax rates were to significantly increase, our results of operations could be materially and adversely affected.

        In addition, the Wyoming state severance tax is significantly less than the state severance tax in Montana. Because a substantial portion of our operations are in Wyoming and therefore subject to the more favorable Wyoming severance tax rate, if Wyoming were to increase this tax or any other tax applicable solely to our Wyoming operations, we may be significantly impacted and our results of operations could be materially and adversely affected.

Increases in the cost of raw materials and other industrial supplies, or the inability to obtain a sufficient quantity of those supplies, could increase our operating expenses, disrupt or delay our production and materially and adversely affect profitability.

        We use considerable quantities of explosives, petroleum-based fuels, tires, steel and other raw materials, as well as spare parts and other consumables in the mining process. If the prices of steel, explosives, tires, petroleum products or other materials continue to increase or if the value of the U.S. dollar continues to decline relative to foreign currencies with respect to certain imported supplies or other products, our operating expenses will increase, which could materially and adversely impact our profitability. Additionally, there are a limited number of suppliers for certain supplies, such as explosives and tires as well as certain mining equipment, and any of our suppliers may divert their products to buyers in other mines or industries or divert their raw materials to produce other products that have a higher profit margin. Shortages in raw materials used in the manufacturing of supplies and mining equipment, which, in some cases, do not have ready substitutes, or the cancellation of our supply contracts under which we obtain these raw materials and other consumables, could limit our ability to obtain these supplies or equipment. As a stand-alone company, we may experience more difficulty in acquiring supplies, particularly where there are shortages, than we otherwise would have experienced as part of the Rio Tinto Group. As a consequence, we may not be able to acquire adequate replacements for these supplies or equipment on a cost-effective basis or at all, which could also materially increase our operating expenses or halt, disrupt or delay our production. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Cost of Product Sold."

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Significant increases in the price of diesel fuel could materially and adversely affect our earnings.

        Operating expenses at our mining locations are sensitive to changes in diesel fuel prices. Since December 2007, our weighted average price for diesel fuel increased from $2.57 per gallon in December 2007 to $3.62 per gallon in September 2008. Diesel fuel expenses represented 10.4% of our cost of product sold for the year ended December 31, 2007, and 12.4% for the six months ended June 30, 2008. We have not entered into any hedge or other arrangements to reduce the volatility in the price of diesel fuel for our operations, although we may do so in the future. In addition, the supply contract under which we purchase all of our diesel fuel expires at the end of 2008. As a result, if we are unable to enter into a new supply contract on the same or similar terms or if the price of diesel fuel continues to increase, we will incur higher expenses for diesel fuel and, therefore, potentially materially lower earnings. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Cost of Product Sold."

As a stand-alone company, we will need to enter into new supply contracts for the raw materials and other mining consumables used in our mining operations. If we are unable to do so, or to do so on a cost-effective basis, our operating expenses could materially increase and our ability to conduct our business could be materially and adversely affected.

        As part of the Rio Tinto Group, we historically obtained explosives, petroleum-based fuels, tires, steel and other raw materials, as well as spare parts and other mining consumables used in the mining process through various Rio Tinto Group global and regional supply contracts. Upon completion of this offering, we will no longer be a party to these Rio Tinto Group supply contracts. Although some of our supplies and equipment will be obtained under purchase orders or other arrangements entered into prior to termination, we expect to enter into new supply contracts prior to the completion of this offering to replace the Rio Tinto Group supply contracts. We cannot assure you that we will be able to enter into new contracts on the same or similar terms to those contracts that currently exist or at all. The prices for those supplies and equipment may be more expensive because we will not be part of the Rio Tinto Group or have access to their supply arrangements. If we are unable to enter into new supply contracts or if the new supply contracts contain materially different terms relative to the Rio Tinto Group supply contracts, including with respect to costs, our operating expenses could materially increase and our mining operations could be materially and adversely affected.

Substantially all of our coal sales contracts are forward sales contracts. If the production costs underlying these contracts increases, our results of operations could be materially and adversely affected.

        Substantially all of our coal sales contracts are forward sales contracts under which customers agree to pay a specified price under their contracts for coal to be delivered in future years. The profitability of these contracts depends on our ability to adequately control the costs of the coal production underlying the contracts. These production costs are subject to variability due to a number of factors, including increases in the cost of labor, supplies or other raw materials, such as diesel fuel. As part of the Rio Tinto Group, we did not enter into hedge or other arrangements to offset the cost variability underlying these forward sale contracts. In the future, we may enter into these types of arrangements but we may not be successful in hedging the volatility of our costs. To the extent our costs increase but pricing under these coal sales contracts remains fixed, we will be unable to pass increasing costs on to our customers. If we are unable to control our costs, our profitability under our forward sales contracts may be impaired and our results of operations could be materially and adversely affected.

Our ability to operate our business effectively could be impaired if we fail to attract and retain key personnel.

        Our ability to operate our business and implement our strategies depends, in part, on the continued contributions of our executive officers and other key employees. The loss of any of our key

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senior executives could have a material adverse effect on our business unless and until we find a replacement. A limited number of persons exist with the requisite experience and skills to serve in our senior management positions. We may not be able to locate or employ qualified executives on acceptable terms. In addition, we believe that our future success will depend on our continued ability to attract and retain highly skilled personnel with coal industry experience. Competition for these persons in the coal industry is intense and we may not be able to successfully recruit, train or retain qualified managerial personnel. As a public company, our future success also will depend on our ability to hire and retain management with public company experience. We may not be able to continue to employ key personnel or attract and retain qualified personnel in the future. Our failure to retain or attract key personnel could have a material adverse effect on our ability to effectively operate our business.

Our management team does not have experience managing our business as a stand-alone public company and if they are unable to manage our business as a stand-alone public company, our business may be harmed.

        We have historically operated as part of the Rio Tinto Group. Following the completion of this offering, we will operate as a stand-alone public company. Our management team does not have experience managing our business on a stand-alone basis or as a public company. If we are unable to manage and operate our company as an independent public entity, our business and results of operations will be adversely affected.

As a stand-alone U.S. public company, we will be required to comply with certain financial reporting and other requirements on a basis that is different than our reporting requirements as a subsidiary of Rio Tinto. If we are unable to comply with these requirements, our business could be materially and adversely affected.

        Prior to this offering, we operated as an indirect wholly owned subsidiary of Rio Tinto, which requires us to provide them financial information for inclusion in their consolidated financial reports. We provided this information in accordance with International Financial Reporting Standards, or IFRS, at a level of materiality commensurate with their consolidated financial statements and necessary to meet their regulatory financial reporting requirements. As a stand-alone public company, we will be required to comply with the record keeping, financial reporting, corporate governance and other rules and regulations of the SEC, including the requirements of the Sarbanes-Oxley Act, the Public Accounting Oversight Board, or PCAOB, and other regulatory bodies. These entities generally require that financial information be reported in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP, which differs from IFRS. We will also be required to report at a level of materiality commensurate with our stand-alone consolidated financial statements and necessary to meet our regulatory financial reporting requirements, which is lower than that of Rio Tinto.

        As an indirect wholly owned subsidiary of Rio Tinto, we were not required and did not have personnel with SEC, Sarbanes-Oxley Act, PCAOB and U.S. GAAP financial reporting expertise. In addition, we were not required to comply with the internal control design, documentation and testing requirements imposed by the Sarbanes-Oxley Act on a stand-alone basis, but rather only complied to the extent required as a part of the Rio Tinto Group. In connection with this offering as a publicly-held, stand-alone company, we will become directly subject to these requirements. If we fail to comply with these requirements, our business and stock price could be materially and adversely affected, including, among other things, through the loss of investor confidence, adverse publicity, investigations and sanctions imposed by regulatory authorities.

We have identified material weaknesses in our internal controls over financial reporting that, if not properly corrected, could result in material misstatements in our financial reporting.

        During the preparation of our carve-out consolidated financial statements as of December 31, 2006 and 2007 and for each of the three years in the period ended December 31, 2007, through our own

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assessment we determined that we have, and our independent registered public accounting firm informed our management of, material weaknesses in our internal controls over financial reporting as a stand-alone company that, if not properly corrected, could result in material misstatements in our financial reporting. Specifically, we have not been required to have, and as a result did not maintain a sufficient complement of personnel with an appropriate level of accounting and financial reporting knowledge, experience and training in the application of U.S. GAAP commensurate with our financial reporting requirements and the complexity of our operations and transactions. We also did not maintain an adequate system of processes and internal controls as a stand-alone public company sufficient to support our financial reporting requirements and produce timely and accurate U.S. GAAP consolidated financial statements consistent with being a stand-alone public company. In addition, during the preparation of our consolidated financial statements as of and for the six months ended June 30, 2008, we identified an error in the consolidated financial statements as of and for the three months ended March 31, 2008. Specifically, we had not recorded an accrual at March 31, 2008 for certain charges from an affiliated entity, totaling $2.0 million, thereby understating selling, general and administrative expenses and amounts due to related parties by this amount in our March 31, 2008 consolidated financial statements. These amounts have been appropriately reflected in our consolidated financial statements for the six months ended June 30, 2008, appearing elsewhere in this prospectus, and we have revised the financial statements as of and for the three months ended March 31, 2008 as appropriate, which appear elsewhere in this prospectus.

        A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. A deficiency in internal control over financial reporting exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis.

        We will need to undertake various remedial actions before we can be reasonably assured that our internal controls and disclosure controls and procedures will be effective. If we continue to experience material weaknesses in our internal controls or conclude that we have ineffective disclosure controls and procedures, investors could lose confidence in our financial reporting, particularly if such weaknesses result in a restatement of our financial results, and our stock price could decline. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Internal Controls."

We will be required by Section 404 of the Sarbanes-Oxley Act to evaluate the effectiveness of our internal controls. If we are unable to achieve and maintain effective internal controls, our operating results and financial condition could be harmed.

        We will be required to comply with Section 404 of the Sarbanes-Oxley Act beginning with the year ending December 31, 2009. Section 404 will require that we evaluate our internal control over financial reporting to enable management to report on, and our independent registered public accounting firm to audit, the effectiveness of those controls. Management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements in accordance with U.S. GAAP. While we have begun the lengthy process of evaluating our internal controls, we are in the early phases of our review and will not complete our review until well after this offering is completed. We cannot predict the outcome of our review at this time. During the course of the review, we may identify additional control deficiencies of varying degrees of severity, in addition to the material weaknesses discussed above.

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        Management has taken steps to improve and continues to improve our internal control over financial reporting, including identification of the gaps in skills base and expertise of staff required in the finance group to operate as a public company. We will incur significant costs to remediate our material weaknesses and deficiencies and improve our internal controls. To comply with these requirements, we may need to upgrade our systems, including information technology, implement additional financial and management controls, reporting systems and procedures and hire additional accounting, finance and legal staff. If we are unable to upgrade our systems and procedures in a timely and effective fashion, we may not be able to comply with our financial reporting requirements and other rules that apply to public companies.

        As a public company, we will be required to report control deficiencies that constitute a material weakness in our internal control over financial reporting. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Internal Controls." We will also be required to obtain an audit report from our independent registered public accounting firm regarding the effectiveness of our internal controls over financial reporting. If we fail to implement the requirements of Section 404 in a timely manner, if we or our independent registered public accounting firm are unable to conclude that our internal control over financial reporting are effective or if we fail to comply with our financial reporting requirements, investors may lose confidence in the accuracy and completeness of our financial reports. In addition, we or members of our management could be the subject of adverse publicity, investigations and sanctions by regulatory authorities, including the SEC and the NYSE, and be subject to shareholder lawsuits. Any of the above consequences could cause our stock price to decline materially and could impose significant unanticipated costs on us.

We will incur higher costs as a result of being a public company, which may be significant. If we fail to accurately predict or effectively manage these costs, our operating results could be materially and adversely affected.

        As a public company, we will incur higher accounting, purchasing, treasury, legal, risk management, corporate governance and other support expenses than we did as a part of the Rio Tinto Group, which may be significant. The SEC and the New York Stock Exchange have imposed substantial requirements on public companies, including requirements for corporate governance practices and for internal controls over financial reporting under Section 404 of the Sarbanes-Oxley Act. We expect these rules and regulations to increase our accounting, legal and other costs and to make some activities more time-consuming. We also will need to hire additional accounting, legal and administrative staff with experience working for public companies. Initially, we may enter into short-term arrangements with third-party service providers for certain services, such as legal, external financial reporting, external communications and investors relations. These arrangements may not be available on favorable terms. In addition, these service providers may not provide these services at levels sufficient to comply with regulatory requirements. We also may not be able to successfully transition away from these third-party service providers. Moreover, the rules that will be applicable to us as a public company after this offering could make it more difficult and expensive for us to attract and retain qualified members of our board of directors and qualified executive officers. We also anticipate that these rules will make it difficult and expensive for us to obtain director and officer liability insurance. While our pro forma consolidated financial statements reflect certain of our estimates of the expected costs as a public company, these estimates may not be accurate and our costs may be greater than reflected in our pro forma consolidated financial statements. If we fail to predict these costs accurately or to manage these costs effectively, our operating results could be adversely affected. See "Unaudited Pro Forma Consolidated Financial Information."

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Extensive environmental regulations, including existing and potential future regulatory requirements relating to air emissions, affect our customers and could reduce the demand for coal as a fuel source and cause coal prices and sales of our coal to materially decline.

        The operations of our customers are subject to extensive environmental regulation particularly with respect to air emissions. For example, the federal Clean Air Act and similar state and local laws extensively regulate the amount of sulfur dioxide, particulate matter, nitrogen oxides, and other compounds emitted into the air from electric power plants, which are the largest end-users of our coal. A series of more stringent requirements relating to particulate matter, ozone, haze, mercury, sulfur dioxide, nitrogen oxide and other air pollutants are expected to be proposed or become effective in coming years. In addition, concerted conservation efforts that result in reduced electricity consumption could cause coal prices and sales of our coal to materially decline.

        Considerable uncertainty is associated with these air emissions initiatives. The content of regulatory requirements in the U.S. is in the process of being developed, and many new regulatory initiatives remain subject to review by federal or state agencies or the courts. Stringent air emissions limitations are either in place or are likely to be imposed in the short to medium term, and these limitations will likely require significant emissions control expenditures for many coal-fired power plants. As a result, these power plants may switch to other fuels that generate fewer of these emissions or may install more effective pollution control equipment that reduces the need for low sulfur coal, possibly reducing future demand for coal and a reduced need to construct new coal-fired power plants. The EIA's expectations for the coal industry assume there will be a significant number of as yet unplanned coal-fired plants built in the future which may not occur. Any switching of fuel sources away from coal, closure of existing coal-fired plants, or reduced construction of new plants could have a material adverse effect on demand for and prices received for our coal. Alternatively, less stringent air emissions limitations, particularly related to sulfur, to the extent enacted could make low sulfur coal less attactive, which could also have a material adverse effect on the demand for and prices received for our coal. See "Environmental and Other Regulatory Matters."

New and potential future regulatory requirements relating to greenhouse gas emissions could affect our customers and could reduce the demand for coal as a fuel source and cause coal prices and sales of our coal to materially decline.

        One major by-product of burning coal is carbon dioxide, which is considered a greenhouse gas and is a major source of concern with respect to global warming. Future regulation of greenhouse gases in the U.S. could occur pursuant to future U.S. treaty commitments, if any, pursuant to the Kyoto Protocol or otherwise, new domestic legislation that, for example, may establish a carbon tax or cap-and-trade program, regulation by the U.S. Environmental Protection Agency, or the EPA, in response to the recent U.S. Supreme Court ruling in Massachusetts v. EPA that the EPA has authority to regulate carbon dioxide emissions under the Clean Air Act, or otherwise. State and regional climate change initiatives, such as the Regional Greenhouse Gas Initiative of certain northeastern and mid-atlantic states, the Western Climate Initiative, the Midwestern Greenhouse Gas Reduction Accord, and the California Global Warming Solutions Act, either have already taken effect or may take effect before federal action. The permitting of new coal-fired power plants has also recently been contested by state regulators and environmental organizations for concerns related to greenhouse gas emissions from the new plants.

        Climate change initiatives and other efforts to reduce greenhouse gas emissions may require additional controls on coal-fired power plants and industrial boilers, may even cause some users of coal to switch from coal to a lower carbon fuel and may result in the closure of coal-fired power plants or in reduced construction of new plants. Any switching of fuel sources away from coal, closure of existing coal-fired plants, or reduced construction of new plants could have a material adverse effect on demand for and prices received for our coal. See "Environmental and Other Regulatory Matters."

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Because we produce and sell coal with low sulfur content, a reduction in the price of sulfur dioxide emission allowances or increased use of technologies to reduce sulfur dioxide emissions could materially and adversely affect the demand for our coal and our results of operations.

        Our customers' demand for our low sulfur coal, and the prices that we can obtain for it, are affected by, among other things, the price of sulfur dioxide emissions allowances. The Clean Air Act places limits on the amounts of sulfur dioxide that can be emitted by an electric power plant in any given year. If a plant exceeds its allowable limits, it must purchase allowances, which are tradeable in the open market. Low prices of these emissions allowances could make our low sulfur coal less attractive to our customers. In addition, more widespread installation by electric utilities of technology that reduces sulfur emissions, which could be accelerated by increases in the prices of sulfur dioxide emissions allowances, may make high sulfur coal more competitive with our low sulfur coal. This competition could materially and adversely affect our business and results of operations.

Extensive environmental regulations impose significant costs on our mining operations, and future regulations could materially increase those costs or limit our ability to produce and sell coal.

        The coal mining industry is subject to increasingly strict regulation by federal, state and local authorities with respect to environmental matters such as:

•

limitations on land use;



•

mine permitting and licensing requirements;



•

reclamation and restoration of mining properties after mining is completed;



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management of materials generated by mining operations;



•

the storage, treatment and disposal of wastes;



•

remediation of contaminated soil and groundwater;



•

air quality standards;



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water pollution;



•

protection of human health, plant-life and wildlife, including endangered or threatened species;



•

protection of wetlands;



•

the discharge of materials into the environment;



•

the effects of mining on surface water and groundwater quality and availability; and



•

the management of electrical equipment containing polychlorinated biphenyls.

        The costs, liabilities and requirements associated with the laws and regulations related to these and other environmental matters may be costly and time-consuming and may delay commencement or continuation of exploration or production operations. We cannot assure you that we have been or will be at all times in compliance with the applicable laws and regulations. Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of cleanup and site restoration costs and liens, the issuance of injunctions to limit or cease operations, the suspension or revocation of permits and other enforcement measures that could have the effect of limiting production from our operations. We may incur material costs and liabilities resulting from claims for damages to property or injury to persons arising from our operations. If we are pursued for sanctions, costs and liabilities in respect of these matters, our mining operations and, as a result, our profitability could be materially and adversely affected.

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        New legislation or administrative regulations or new judicial interpretations or administrative enforcement of existing laws and regulations, including proposals related to the protection of the environment that would further regulate and tax the coal industry, may also require us to change operations significantly or incur increased costs. Such changes could have a material adverse effect on our financial condition and results of operations. See "Environmental and Other Regulatory Matters."

Our operations may affect the environment or cause exposure to hazardous substances, and our properties may have environmental contamination, any of which could result in material liabilities to us.

        Our operations currently use, and in the past have used, hazardous materials and generate, and in the past have generated, hazardous wastes. In addition, many of the locations that we own or operate were used for coal mining and/or involved hazardous materials either before or after we were involved with these locations. We may be subject to claims under federal and state statutes and/or common law doctrines for toxic torts, natural resource damages and other damages, as well as for the investigation and clean up of soil, surface water, groundwater, and other media. These claims may arise, for example, out of current or former conditions at sites that we own or operate currently, as well as at sites that we or predecessor entities owned or operated in the past, and at contaminated third-party sites at which we have disposed of waste. As a matter of law, and despite any contractual indemnity or allocation arrangements or acquisition agreements to the contrary, our liability for these claims may be joint and several, so that we may be held responsible for more than our share of any contamination, or even for the entire share.

        These and similar unforeseen impacts that our operations may have on the environment, as well as human exposure to hazardous substances or wastes associated with our operations, could result in costs and liabilities that could materially and adversely affect us.

Extensive governmental regulations pertaining to employee safety and health impose significant costs on our mining operations, which could materially and adversely affect our results of operations.

        Federal and state safety and health regulations in the coal mining industry are among the most comprehensive and pervasive systems for protection of employee safety and health affecting any segment of U.S. industry. Compliance with these requirements imposes significant costs on us and can result in reduced productivity. Moreover, the possibility exists that new health and safety legislation and/or regulations and orders may be adopted that may materially and adversely affect our mining operations.

        We must compensate employees for work-related injuries. If we do not make adequate provisions for our workers' compensation liabilities, it could harm our future operating results. In addition, the erosion through tort liability of the protections we are currently provided by workers' compensation laws could increase our liability for work-related injuries and materially and adversely affect our operating results. Under federal law, each coal mine operator must secure payment of federal black lung benefits to claimants who are current and former employees and contribute to a trust fund for the payment of benefits and medical expenses to claimants who last worked in the coal industry before January 1, 1970. The trust fund is funded by an excise tax on coal production. If this tax increases, or if we could no longer pass it on to the purchasers of our coal under our coal sales agreements, our operating costs could be increased and our results could be materially and adversely harmed. If new laws or regulations increase the number and award size of claims, it could materially and adversely harm our business. See "Environmental and Other Regulatory Matters."

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Federal or state regulatory agencies have the authority to order certain of our mines to be temporarily or permanently closed under certain circumstances, which could materially and adversely affect our ability to meet our customers' demands.

        Federal or state regulatory agencies have the authority under certain circumstances following significant health and safety incidents, such as fatalities, to order a mine to be temporarily or permanently closed. If this occurred, we may be required to incur capital expenditures to re-open the mine. In the event that these agencies order the closing of our mines, our coal sales contracts generally permit us to issue force majeure notices which suspend our obligations to deliver coal under these contracts. However, our customers may challenge our issuances of force majeure notices. If these challenges are successful, we may have to purchase coal from third-party sources, if it is available, to fulfill these obligations, incur capital expenditures to re-open the mines and/or negotiate settlements with the customers, which may include price reductions, the reduction of commitments or the extension of time for delivery or terminate customers' contracts. Any of these actions could have a material adverse effect on our business and results of operations.

We may be unable to obtain, maintain or renew permits necessary for our operations, which would materially reduce our production, cash flow and profitability.

        Mining companies must obtain a number of permits that impose strict regulations on various environmental and operational matters in connection with coal mining. These include permits issued by various federal, state and local agencies and regulatory bodies. The permitting rules, and the interpretations of these rules, are complex, change frequently, and are often subject to discretionary interpretations by the regulators, all of which may make compliance more difficult or impractical, and may possibly preclude the continuance of ongoing operations or the development of future mining operations. The public, including non-governmental organizations, anti-mining groups and individuals, have certain statutory rights to comment upon and submit objections to requested permits and environmental impact statements prepared in connection with applicable regulatory processes, and otherwise engage in the permitting process, including bringing citizens' lawsuits to challenge the issuance of permits, the validity of environmental impact statements or performance of mining activities. Accordingly, required permits may not be issued or renewed in a timely fashion or at all, or permits issued or renewed may be conditioned in a manner that may restrict our ability to efficiently and economically conduct our mining activities, any of which would materially reduce our production, cash flow, and profitability.

The availability and reliability of transportation and increases in transportation costs, particularly for rail systems, could materially and adversely affect the demand for our coal or impair our ability to supply coal to our customers.

        Transportation costs, particularly rail transportation costs, represent a significant portion of the total cost of coal for our customers, and the cost of transportation is a key factor in a customer's purchasing decision. Increases in transportation costs or the lack of sufficient rail capacity or availability could make coal a less competitive source of energy or could make the coal produced by us less competitive than coal produced from other regions, either of which could lead to reduced coal sales and/or reduced prices we receive for the coal.

        Our ability to sell coal to our customers depends primarily upon third-party rail systems. If our customers are unable to obtain rail or other transportation services, or to do so on a cost-effective basis, our business and growth strategy could be adversely affected. Alternative transportation and delivery systems are generally inadequate and not suitable to handle the quantity of our shipments or to ensure timely delivery to our customers. In particular, much of the PRB is served by two rail carriers and two of our mines in the Northern PRB are only serviced by one rail carrier. The loss of access to rail capacity in the PRB could create temporary disruption until this access was restored, significantly

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impairing our ability to supply coal and resulting in materially decreased revenues. Our ability to open new mines or expand existing mines may also be affected by the availability and cost of rail or other transportation systems available for servicing these mines.

        While we are a party to some transportation contracts, our coal customers typically contract for, and pay directly for transportation of coal from the mine or port to the point of use. Disruption of these transportation services because of weather-related problems, mechanical difficulties, train derailment, bridge or structural concerns, infrastructure damage, whether caused by ground instability, accidents or otherwise, strikes, lock-outs, lack of fuel or maintenance items, fuel costs, transportation delays, accidents, terrorism or domestic catastrophe or other events could temporarily or over the long term impair our ability to supply coal to our customers and our customers' ability to take our coal and, therefore, could materially and adversely affect our business and results of operations.

A shortage of skilled labor in the mining industry could reduce labor productivity and increase costs, which could materially and adversely affect our business and results of operations.

        Efficient coal mining using modern techniques and equipment requires skilled laborers in multiple disciplines such as electricians, equipment operators, mechanics, engineers and welders, among others. Current shortages for these types of skilled labor exist. If the shortage of skilled labor continues or worsens, our labor and overall productivity or costs could be materially and adversely affected.

        As a result of current favorable market conditions and the high demand for skilled labor in the region in which we operate, we are experiencing a record level of labor costs. Our labor costs were approximately 19.0% of our cost of product sold for the year ended December 31, 2007. We also utilize external contractors for portions of our operations, and the costs of these contractors has increased as well. As of October 1, 2008, we had 477 external contractors on a full time equivalent basis. This number fluctuates from time to time. If coal prices decrease in the future and labor and contractor prices are not reduced commensurately, or if we experience materially increased health and benefit costs with respect to our employees, our results of operations could be materially and adversely affected.

Due to the long-term nature of our coal sales agreements, the prices we receive for our coal at any given time may be lower than then-existing current market prices for coal.

        We sell most of our coal under long-term coal sales agreements, which we generally define as contracts with a term of one to five years. The remaining amount not subject to long-term coal sales agreements is sold as spot sales in term allotments of less than 12 months. For the year ended December 31, 2007 and the six months ended June 30, 2008, approximately 92.3% and 97.3%, respectively, of our revenues was derived from coal sales that were made under long-term coal sales agreements. The prices for coal shipped under these agreements are typically fixed for an agreed amount of time. Pricing in some of these contracts is subject to certain adjustments in later years or under certain circumstances, and may be below the current market price for similar type coal at any given time, depending on the timeframe of the contract. As a consequence of the substantial volume of our forward sales, we have less coal available to sell under short-term contracts with which to immediately capitalize on higher coal prices, if and when they arise. In addition, in some cases, our ability to realize the higher prices that may be available in the spot market may be restricted when customers elect to purchase additional volumes allowable under some contracts at contract prices that are lower than current spot prices.

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Changes in purchasing patterns in the coal industry may make it difficult for us to enter into new contracts with customers, or do so on favorable terms, which could materially and adversely affect our business and results of operations.

        Although we currently sell the majority of our coal under long-term coal sales contracts, as electric utilities customers continue to adjust to increased price volatility, increased fungibility of coal products, frequently changing regulations and the increasing deregulation of their industry, they are becoming less willing to enter into long-term coal sales contracts. When our current contracts with customers expire or are otherwise renegotiated, our customers may decide not to extend or enter into new long-term coal sales contracts or our customers may decide to purchase fewer tons of coal than in the past or on different terms, including under different pricing terms. We have one significant broker sales contract which in 2007 contributed $116.6 million of revenue and income before tax of $38.3 million after an amortization charge for the related contract rights of $34.2 million. Final deliveries are expected to be made under this contract in the first quarter of 2010 at which time we expect the contract to expire. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Revenues."

        These trends in purchasing patterns in the coal industry could continue in the future and, to the extent our customers shift away from long-term supply contracts, it will be more difficult to predict our future sales, and we cannot be certain that we will have a market for our future production at acceptable prices. The prices we receive in the spot market may be less than the contractual price an electric utility is willing to pay for a committed supply. Furthermore, spot market prices tend to be more volatile than contractual prices, which could result in decreased revenues.

Failure to obtain, maintain or renew our security arrangements, such as surety bonds or letters of credit, in a timely manner and on acceptable terms could affect our ability to secure reclamation and coal lease obligations, and materially and adversely affect our ability to mine or lease coal.

        Federal and state laws require us to secure the performance of certain long-term obligations, such as mine closure or reclamation costs and federal and state workers' compensation costs, including black lung. A significant portion of our obligations are secured by surety bonds and at December 31, 2007 and June 30, 2008, there were $395.4 million and $416.4 million, respectively, of surety bonds in place (including our obligations with respect to the Decker mine and $96.7 million at both December 31, 2007 and June 30, 2008, with respect to Colowyo and other non-coal businesses). Certain business transactions, such as coal leases and other obligations, may also require bonding. We may have difficulty procuring or maintaining our surety bonds. Our bond issuers may demand higher fees, additional collateral, including putting up letters of credit, or other terms less favorable to us upon those renewals. While we were a part of the Rio Tinto Group, Rio Tinto typically served as guarantor of our surety bonds. Surety bond issuers may demand terms that are less favorable to us and there may be fewer companies willing to issue these bonds. Because we are required by state and federal law to have these bonds in place before mining can commence, or continue, our failure to maintain surety bonds, letters of credit or other guarantees or security arrangements would materially and adversely affect our ability to mine or lease coal. That failure could result from a variety of factors including lack of availability, our lack of affiliation with the Rio Tinto Group, higher expense or unfavorable market terms, the exercise by third-party surety bond issuers of their right to refuse to renew the surety and restrictions on availability of collateral for current and future third-party surety bond issuers under the terms of any credit facility then in place. In addition, because we will not be an investment grade company upon the completion of this offering, surety bond issuers will likely require significantly more collateral than prior to the offering while we were a part of the Rio Tinto Group.

        We have also historically used letters of credit issued under Rio Tinto's pre-existing credit facilities to secure our obligations or, occasionally, serve as collateral for reclamation surety bonds. At December 31, 2007 and June 30, 2008, there were $328.1 million and $328.2 million, respectively, of letters of credit in place under Rio Tinto's credit facilities and other arrangements between RTEA and

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various counterparties (including our obligations with respect to the Decker mine and $8.6 million at both December 31, 2007 and June 30, 2008, with respect to Colowyo and other non-coal businesses). These letters of credit are typically renewable annually at various times throughout a given year. We expect that any future credit facility will provide for a revolving credit facility of $             million, of which up to $             million may be used for letters of credit. If we do not maintain sufficient borrowing capacity under our expected credit facility for additional letters of credit, we may be unable to obtain or renew surety bonds required for our mining operations.

If the assumptions underlying our reclamation and mine closure obligations are materially inaccurate, our costs could be greater than anticipated.

        All of our mines are surface mining operations. The Surface Mining Control and Reclamation Act of 1977, or SMCRA, and counterpart state laws and regulations establish operational, reclamation and closure standards for all aspects of surface mining. We estimate our total reclamation and mine-closing liabilities based on permit requirements, engineering studies and our engineering expertise related to these requirements. The estimate of ultimate reclamation liability is reviewed periodically by our management and engineers. The estimated liability can change significantly if actual costs vary from our original assumptions or if governmental regulations change significantly. Statement of Financial Accounting Standards, or SFAS, No. 143, Accounting for Asset Retirement Obligations, requires that asset retirement obligations be recorded as a liability based on fair value, which is calculated as the present value of the estimated future cash flows. In estimating future cash flows, we consider the estimated current cost of reclamation and apply inflation rates and a third-party profit, as necessary. The third-party profit is an estimate of the approximate markup that would be charged by contractors for work performed on behalf of us. The resulting estimated reclamation and mine closure obligations could change significantly if actual amounts change significantly from our assumptions, which could have a material adverse effect on our results of operation and financial condition. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources After this Offering"—Off-Balance Sheet Arrangements" for a description of our estimated costs of these liabilities.

If the third-party sources we use to supply coal are unable to fulfill the delivery terms of their contracts, our results of operations could be materially and adversely affected.

        To fulfill deliveries under our coal sales agreements, we may from time to time purchase coal through third-party sources. For the year ended December 31, 2007 and the six months ended June 30, 2008, we purchased 6.3 million tons and 3.0 million tons, respectively, from third-party sources for delivery during those periods. We also from time to time use third-party sources to sell our coal. Our profitability and exposure to loss on these transactions or relationships is dependent upon the reliability, including the financial viability, of the third-party coal producer, and on the price of the coal supplied by the third-party or sold by us. Operational difficulties, changes in demand and other factors beyond our control could affect the availability, pricing and quality of coal purchased by us. Disruptions in the quantities or qualities of coal purchased by us could affect our ability to fill our customer orders or require us to purchase coal, including at higher prices, from other sources in order to satisfy those orders. If we are unable to fill a customer order or if we are required to purchase coal from other sources in order to satisfy a customer order, we could lose existing customers, and our results of operations could be adversely affected.

Certain provisions in our coal sales contracts may provide limited protection during adverse economic conditions or may result in economic penalties upon a failure to meet specifications, any of which may cause our revenues and profits to suffer.

        Most of our sales contracts contain provisions that allow for the base price of our coal in these contracts to be adjusted due to new statutes, ordinances or regulations that affect our costs related to performance. Because these provisions only apply to the base price of coal these terms may provide

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only limited protection due to changes in regulations. A few of our sales contracts also contain provisions that allow for the purchase price to be renegotiated at periodic intervals. Index-based pricing, "price re-opener" and other similar provisions in sales contracts may reduce the protection available under long-term contracts from short-term coal price volatility. Price re-opener and index provisions, which can permit renegotiation by either party, including at pre-determined times, or based on a fixed formula, are present in contracts covering approximately 25% of our tonnage commitments in 2008 and beyond. Price re-opener provisions may automatically set a new price based on the prevailing market price or, in some instances, require the parties to negotiate a new price, sometimes between a specified range of prices. In some circumstances, a significant adjustment in base price or the failure of the parties to agree on a price under a price re-opener provision can lead to termination of the contract. Any adjustment or renegotiations leading to a significantly lower contract price could result in decreased revenues.

        Quality and volumes for the coal are stipulated in coal sales agreements. In most cases, the annual pricing and volume obligations are fixed although in some cases the volume specified may vary depending on the quality of the coal. In a relatively small number of contracts customers are allowed to vary the amount of coal taken under the contract. Most of our coal sales agreements contain provisions requiring us to deliver coal within certain ranges for specific coal characteristics such as heat content, sulfur, ash and ash fusion temperature. Failure to meet these specifications can result in economic penalties, including price adjustments, suspension, rejection or cancellation of deliveries or termination of the contracts. Many of our contracts contain clauses which in some cases may allow customers to terminate the contract in the event of certain changes in environmental laws and regulations.

Upon the occurrence of a force majeure, we or our customers may be permitted to temporarily suspend performance under our coal sales contracts which could cause our revenues and profits to suffer.

        Our coal sales agreements typically contain force majeure provisions allowing temporary suspension of performance by us, or our customers during the duration of specified events beyond the control of the affected party, including events such as strikes, adverse mining conditions, mine closures, serious transportation problems that affect us or the buyer or unanticipated plant outages that may affect the buyer. Some contracts stipulate that this tonnage can be made up by mutual agreement or at the discretion of the buyer. Agreements between our customers and the railroads servicing our mines may also contain force majeure provisions. Generally, our coal sales agreements allow our customer to suspend performance in the event that the railroad fails to provide its services due to circumstances that would constitute a force majeure. In the event that we are required to suspend performance under any of our coal sales contracts, or we are required to purchase additional tonnage during the period in which performance under the contract is suspended, our revenues and profits could be materially and adversely affected.

Acquisitions that we may undertake in the future involve a number of risks, any of which could cause us not to realize the anticipated benefits.

        We have focused on strategic acquisitions and subsequent expansions of large, low cost, low sulfur operations in the PRB and replacement of, and additions to, our reserves through the acquisition of companies, mines and reserves. We intend to pursue acquisition opportunities in the future. If we are unable to successfully integrate the businesses or properties we acquire, or reserves that we lease or otherwise acquire, our business, financial condition or results of operations could be negatively affected. Acquisition transactions involve various risks, including:

•

uncertainties in assessing the strengths and potential profitability, and the related weaknesses, risks, contingent and other liabilities, of acquisition candidates;



•

changes in business, industry, market, or general economic conditions that affect the assumptions underlying our rationale for pursuing the acquisition;

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•

the inability to achieve identified operating and financial synergies anticipated to result from an acquisition;



•

the potential loss of key customers, management or employees of an acquired business;



•

the nature and composition of the workforce, including the acquisition of a unionized workforce;



•

diversion of our management's attention from other business concerns;



•

regulatory challenges for completing and operating the acquired business, including opposition from environmental groups or regulatory agencies;



•

environmental or geological problems in the acquired properties, including factors that make the coal unsuitable for intended customers due to ash, heat value, moisture or contaminants; and



•

inability to acquire sufficient surface rights to enable extraction of the coal resources.

        Any one or more of these factors could cause us not to realize the benefits we might anticipate from an acquisition. Moreover, any acquisition opportunities we pursue could materially increase our liquidity and capital resource needs and may require us to incur indebtedness, seek equity capital or both. In addition, future acquisitions could result in our assuming significant long-term liabilities relative to the value of the acquisitions.

We do not currently operate the Decker mine, in which we hold a 50% interest, and our results of operation could be adversely affected if the third-party mine operator fails to effectively operate the mine. In addition, our future credit arrangements may limit our ability to contribute cash to the Decker mine.

        Through our indirect, wholly-owned subsidiary, we hold a 50% interest in the Decker mine in Montana through a joint venture agreement with an indirect, wholly-owned subsidiary of Level 3. The Decker mine is managed by a third-party mine operator. While we participate in the management committee of the Decker mine under the terms of the joint venture agreement, we do not control the daily management of the Decker mine and our employees do not participate in the day-to-day operations of the mine. If the third-party mine operator fails to manage the Decker mine effectively, our results of operation could be adversely affected.

        While capital contributions to the Decker joint venture have historically been made at the discretion of the management committee, under the terms of the joint venture agreement we may be required to contribute our proportional share of funds to carry on the business of the joint venture or to cover liabilities. In the event that either joint venture partner does not contribute its share of operating expenses or other liabilities, the other partner is not required to assume their obligation, but may have joint and several liability as a matter of law. In addition, if we do not provide our proportional share or our joint venture partner does provide its proportional share, our interest in the Decker mine will be adjusted proportionally. Our future credit arrangements may include provisions limiting our ability to make contributions to the Decker joint venture.

Our work force could become unionized in the future, which could adversely affect the stability of our production and materially reduce our profitability.

        All of our mines, other than the Decker mine, which we do not operate, are operated by non-union employees. Our employees have the right at any time under the National Labor Relations Act to form or affiliate with a union, and in the past unions have conducted limited organizing activities in this regard. If our employees choose to form or affiliate with a union and the terms of a union collective bargaining agreement are significantly different from our current compensation and job assignment arrangements with our employees, these arrangements could adversely affect the stability of our production and materially reduce our profitability. In addition, even if we remain a non-union operation, our business may still be adversely affected by work stoppages at unionized companies or unionized transportation and service providers.

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        We hold a 50% interest in the Decker mine, which is a union-based operation. These union-represented employees could strike, which could adversely affect production at the Decker mine, increase Decker's costs and disrupt shipments of coal from the Decker mine to its customers, all of which could materially and adversely affect Decker's profitability and the value of our investment in Decker.

Provisions in our federal and state lease agreements, or defects in title or the loss of a leasehold interest in certain property or reserves or related surface rights, could limit our ability to mine our coal reserves.

        We conduct a significant part of our coal mining operations on federal coal that is leased through the LBA process. We also conduct a portion of our operations on coal that is leased from the states of Montana or Wyoming, as applicable. Under these federal and state leases, if the leased coal reserves are not diligently developed during the initial 10 years of the leases or if certain other terms of the leases are not complied with, including the requirement to produce a minimum quantity of coal or pay a minimum production royalty, if applicable, the BLM or the applicable state regulatory agency can terminate the lease prior to the expiration of its term. If any of our leases are terminated, we would be unable to mine the affected coal and our business and results of operations could be materially adversely affected.

        We also lease from private third parties or own outright a smaller portion of our reserves. A title defect or the loss of any of these private leases or the surface rights related to any of our reserves, including reserves acquired through the LBA process, could adversely affect our ability to mine the associated coal reserves. Consistent with industry practice, we conduct only limited investigations of title to our coal properties prior to leasing. Title to properties leased from private third parties is not usually fully verified until we make a commitment to develop a property, which may not occur until we have obtained the necessary permits and completed exploration of the property. In addition, these leasehold interests may be subject to superior property rights of other third parties. Title or other defects in surface rights held by us or other third parties could impair our ability to mine the associated coal reserves or cause us to incur unanticipated costs.

Terrorist attacks and threats, escalation of military activity in response to these attacks or acts of war may materially and adversely affect our business and results of operations.

        Terrorist attacks and threats, escalation of military activity or acts of war may have significant effects on general economic conditions, fluctuations in consumer confidence and spending and market liquidity, each of which could materially and adversely affect our business. Future terrorist attacks, rumors or threats of war, actual conflicts involving the U.S. or its allies, or military or trade disruptions affecting our customers may significantly affect our operations and those of our customers. Strategic targets such as energy-related assets and transportation assets may be at greater risk of future terrorist attacks than other targets in the U.S. Disruption or significant increases in energy prices could result in government-imposed price controls. It is possible that any of these occurrences, or a combination of them, could have a material adverse effect on our business and results of operations, including from delays or losses in transportation, decreased sales of our coal or extended collections from customers that are unable to timely pay us in accordance with the terms of their supply agreement.

Risks Related to Our Separation from Rio Tinto America and Our Relationship with Rio Tinto

We will rely on an affiliate of Rio Tinto America to provide us with certain key services for our business pursuant to the terms of a transition services agreement for a limited transition period. If this Rio Tinto America affiliate fails to perform its obligations under the agreement or if we do not find equivalent replacement services, we may be unable to provide these services or implement substitute arrangements on a timely and cost-effective basis on terms favorable to us.

        As part of the Rio Tinto Group certain key services are currently provided by various members of the Rio Tinto Group, including services related to treasury, accounting, procurement, legal services,

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information technology, employee benefit and welfare plans. Prior to the completion of this offering, we will enter into a Transition Services Agreement, whereby an affiliate of Rio Tinto America will provide us with certain of these key services for a transition period of approximately nine months, although in some cases, such services will be provided on a more limited basis than we have received previously. We believe it is necessary for the Rio Tinto America affiliate to provide these services for us to facilitate the efficient operation of our business as we transition to becoming a public company. See "Separation Transactions and Related Agreements." Once the nine-month transition period specified in the Transition Services Agreement has expired, or if the Rio Tinto America affiliate fails to perform its obligations under the Transition Services Agreement, we will be required to provide these services ourselves or to obtain substitute arrangements with third parties. After the transition period, we may be unable to provide these services internally because of financial or other constraints or be unable to implement substitute arrangements on a timely and cost-effective basis on terms that are favorable to us, or at all.

Our results as a separate, stand-alone company could be significantly different from those portrayed in our historical financial results.

        The historical financial information included in this prospectus has been derived from the consolidated financial statements of Rio Tinto and does not necessarily reflect what our financial position, results of operations, cash flows, costs or expenses would have been had we been a separate, stand-alone company during the periods presented. Rio Tinto did not account for us, and we were not operated, as a separate, stand-alone company for the historical periods presented. In addition, the historical consolidated financial information includes financial information for certain other operations, including with respect to the Colowyo mine. Due to the terms, conditions and other restrictions contained in the existing financing arrangements with respect to the Colowyo mine, the Colowyo mine will not be transferred to Cloud Peak Energy in connection with this offering and the concurrent offering. The historical costs and expenses reflected in our consolidated financial statements also include allocations of general and administrative costs and Rio Tinto headquarters overhead costs from Rio Tinto and its subsidiaries. These expenses are estimates and were based on what we and Rio Tinto considered to be reasonable allocations of the historical costs incurred by Rio Tinto to provide these services required in support of our business.

        Accordingly, our historical consolidated financial information may not be reflective of our financial position, results of operations or cash flows or costs had we been a separate, stand-alone company during the periods presented, and the historical financial information may not be a reliable indicator of what our financial position, results of operations or cash flows will be in the future.

The pro forma consolidated financial information in this prospectus is based on estimates and assumptions that may prove to be materially different from our actual experience as a separate, stand-alone public company.

        In preparing the pro forma consolidated financial information included elsewhere in this prospectus, we have made certain adjustments to the historical consolidated financial information based upon currently available information and upon estimates and assumptions that our management believes are reasonable in order to reflect, on a pro forma basis, the impact of the transactions related to our separation from Rio Tinto America. However, these estimates are predicated on assumptions, judgments and other information which are inherently uncertain.

        These estimates and assumptions used in the preparation of the pro forma consolidated financial information in this prospectus may be materially different from our actual experience as a separate, independent company. The pro forma consolidated financial information included elsewhere in this prospectus does not purport to represent what our results of operations would actually have been had we operated as a separate, independent company during the periods presented, nor do the pro forma data give effect to any events other than those discussed in the unaudited pro forma consolidated

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financial information and related notes. See "Unaudited Pro Forma Consolidated Financial Information."

We will be required to pay Rio Tinto America for most of the benefits we may claim as a result of the tax basis step-up we receive in connection with this offering and related transactions.

        We intend to enter into a Tax Receivable Agreement with Rio Tinto America or its affiliate that will provide for the payment by us to Rio Tinto America or its affiliate of 85% of the amount of cash savings, if any, in U.S. federal, state, local and foreign income tax or franchise tax that we will actually realize as a result of the increases in tax basis that we expect to obtain in connection with this offering and related transactions, and of certain other tax benefits related to entering into the Tax Receivable Agreement. Due to the size of the increases in our subsidiaries' tax bases in their tangible and intangible assets, as well as the increase in our basis in the equity of our subsidiaries, we expect to make substantial payments to Rio Tinto America or its affiliate under the Tax Receivable Agreement. Assuming no material changes in the relevant tax law and that we earn sufficient taxable income to realize the full tax benefit of the increased depreciation, amortization and cost depletion deductions, we expect that future payments under the Tax Receivable Agreement in respect of the purchase will range from approximately $             million to $             million in the aggregate over the term of the agreement (assuming an initial public offering price of         , the midpoint of the range set forth on the cover page of this prospectus), and will be payable over the next            years. The payments under the Tax Receivable Agreement will not be conditioned upon Rio Tinto America's or its affiliate's continued ownership of our stock. Our obligations under the Tax Receivable Agreement may affect our available cash, and we may need to incur debt to finance payments under the Tax Receivable Agreement to the extent that our cash resources are insufficient to meet our obligations under the Tax Receivable Agreement as a result of timing discrepancies or otherwise.

        Our ability to achieve benefits from any tax basis increase, and the payments expected to be made under the Tax Receivable Agreement, will depend upon a number of factors, as discussed above, including the timing and amount of our future income. The U.S. Internal Revenue Service may challenge all or part of that tax basis increase, and a court could sustain such a challenge.

Rio Tinto America or its affiliates may have interests that differ from your interests as shareholders, and they may be able to influence our business and affairs.

        Upon the completion of this offering, our largest shareholder, Rio Tinto America, will own, in the aggregate, approximately             % of our outstanding common stock, or approximately            % if the underwriters exercise their over-allotment option in full. As a result, Rio Tinto America would be our largest shareholder and, while it continues to own a large amount of our stock, it will be able to influence any matters requiring approval by our shareholders, including the election of directors and the approval of mergers or other significant corporate transactions. Rio Tinto America or its affiliates may have interests that differ from your interests, and they may vote in a way with which you disagree and that may be materially adverse to your interests. The concentration of ownership of our common stock may have the effect of delaying, preventing or deterring a change of control of our company, could deprive our shareholders of an opportunity to receive a premium for their common stock as part of a sale of our company and may adversely affect the market price of our common stock.

Rio Tinto may benefit from corporate opportunities that might otherwise be available to us.

        Rio Tinto will continue to hold certain coal assets in the U.S. and abroad following the completion of this offering. The Colowyo mine in Colorado will not be transferred to Cloud Peak Energy but has been included in our historical business and may compete with our continuing business. Rio Tinto may expand, through development of its remaining coal business, acquisitions or otherwise, its operations that directly or indirectly compete with us. For one year following the completion of this offering, Rio Tinto America and its affiliates will not pursue any competitive activity or acquisition in the coal industry within the PRB. Rio Tinto America and its affiliates will not be prohibited from pursuing any

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competitive activity or acquisition outside of the PRB, whether during or after this one-year period. Following the completion of this offering, if a corporate opportunity is offered to Rio Tinto America or its affiliates or one or more of Rio Tinto America's or its affiliates' executive officers or directors that relates to any competitive activity or acquisition in the coal industry:

•

within the PRB after the one-year period referred to above; or



•

outside of the PRB,

no such person shall be liable to us or any of our shareholders (or any affiliate thereof) for breach of any fiduciary or other duty by reason of the fact that the person, including Rio Tinto America and its affiliates, pursues or acquires the business opportunity, directs the business opportunity to another person or fails to present the business opportunity, or information regarding the business opportunity, to us, unless, in the case of any person who is a director or executive officer of us, the business opportunity is expressly offered to the director or executive officer in his or her capacity as an executive officer or director of our company.

        In addition, Rio Tinto may have other business interests and may engage in any other businesses not specifically prohibited which could compete with us, and these potential conflicts of interest could have a material adverse effect on our business, financial condition, results of operations or prospects if attractive corporate opportunities are allocated by Rio Tinto to itself or other members of the Rio Tinto Group. See "Description of Capital Stock."

Our directors and executive officers have potential conflicts of interest with us and your interests as shareholders.

        We expect that, following this offering, one of our directors will also be an executive officer of Rio Tinto or its affiliates. This director owes fiduciary duties to our shareholders, which may conflict with the director's role as an executive officer of Rio Tinto or its affiliates. As a result, in connection with any transaction or other relationship involving both companies, this director may, but is not required to, recuse himself and would therefore not participate in any board action relating to these transactions or relationships.

        Our chief executive officer and some of our directors own shares of Rio Tinto or options to purchase Rio Tinto common stock, which may be of greater value than their ownership of our common stock. Ownership of Rio Tinto shares by our directors and executive officers could create, or appear to create, potential conflicts of interest when directors and executive officers are faced with decisions that could have different implications for Rio Tinto or its affiliates than they do us.

Our agreements with Rio Tinto America and its affiliates related to this offering and our separation from Rio Tinto America may be less favorable to us than similar agreements between unaffiliated third parties.

        We will enter into various agreements with Rio Tinto America and its affiliates in connection with the separation while we are a part of the Rio Tinto Group. These agreements may be less favorable to us than similar agreements negotiated between unaffiliated third parties. Pursuant to our agreements with Rio Tinto America and its affiliates, we have agreed to indemnify Rio Tinto America and its affiliates for liabilities related to our business and certain liabilities related to this offering. See "Separation Transactions and Related Agreements" for a description of these indemnification obligations, as well as the other terms and obligations of our agreements with Rio Tinto America and its affiliates. The allocation of assets and liabilities between Rio Tinto America and us may not reflect the allocation that would have been reached by two unaffiliated parties.

Third parties may seek to hold us responsible for liabilities of Rio Tinto America that we did not assume in our separation.

        Third parties may seek to hold us responsible for liabilities of Rio Tinto America related to the Colowyo mine and the uranium business, which will not be transferred to Cloud Peak Energy in

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connection with this offering. Under the Master Separation Agreement, Rio Tinto America will agree to indemnify us for claims and losses relating to these liabilities. If those liabilities are significant and we are ultimately held liable for them, we cannot assure you that we will be able to recover the full amount of our losses from Rio Tinto America.

Risks Related to This Offering and Ownership of Our Common Stock

Our stock price could be volatile and could decline for a variety of reasons following this offering, resulting in a substantial loss on your investment.

        Currently, there is no public trading market for our common stock. We cannot predict the extent to which investor interest will lead to an active trading market for our common stock or the prices at which our common stock will trade following this offering. If an active trading market does not develop, you may have difficulty selling any common stock that you buy and the value of your shares may be impaired.

        The initial public offering price for our shares of common stock will be determined by negotiations between the representatives of the underwriters and us and the selling shareholder. This price may not reflect the market price of our common stock following this offering. You may be unable to resell the common stock you purchase at or above the initial public offering price.

        The stock markets generally have experienced extreme volatility, often unrelated to the operating performance of the individual companies whose securities are traded publicly. Broad market fluctuations and general economic conditions may materially adversely affect the trading price of our common stock.

        Significant price fluctuations in our common stock could result from a variety of other factors, including, among other things, actual or anticipated fluctuations in our operating results or financial condition, new laws or regulations or new interpretations of existing laws or regulations applicable to our business, sales of our common stock by our shareholders and any other factors described in this "Risk Factors" section of this prospectus.

If securities analysts do not publish research or reports about our company and our industry, or if they issue unfavorable commentary about us or our industry or downgrade our common stock, the price of our common stock could decline.

        The trading market for our common stock will depend in part on the research and reports that securities analysts publish about our company and our industry. We do not control these analysts. One or more analysts could downgrade our stock or issue other negative commentary about our company or our industry. In addition, we may be unable or slow to attract research coverage, and the analysts who publish information about our common stock will have had relatively little recent experience with our company, which could affect their ability to accurately forecast our results or make it more likely that we fail to meet their estimates. Alternatively, if one or more of these analysts cease coverage of our company, we could lose visibility in the market. As a result of one or more of these factors, the trading price for our stock could decline.

Future sales of our common stock or other securities convertible into our common stock could cause our stock price to decline.

        Upon completion of this offering, we will have                        shares of unregistered common stock outstanding. Sales of substantial amounts of our unregistered common stock in the public market, including by Rio Tinto America, or the perception that these sales may occur, could cause the market price of our common stock to decrease significantly. Rio Tinto America intends to sell its remaining shares of our common stock as soon as practicable depending on market conditions and any applicable contractual or legal restrictions. In addition, we have issued                        shares of our Series A Preferred Stock to Rio Tinto America, which it will sell in a concurrent offering. Unless previously converted, each share of our Series A Preferred Stock will automatically convert on approximately the

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third anniversary of the issuance of the Series A Preferred Stock, into between a minimum of                        shares and a maximum of                                    shares of our common stock, depending on the average of the closing prices of our common stock over the 20 consecutive trading day period ending on, and including, the third trading day immediately preceding approximately the third anniversary of the issuance of the Series A Preferred Stock. The minimum and maximum conversion rates will be subject to anti-dilution adjustments in certain circumstances. At any time prior to approximately the third anniversary of the issuance of the Series A Preferred Stock, holders may elect to convert their shares of Series A Preferred Stock at the minimum conversion rate of                                    shares of common stock for each share of Series A Preferred Stock. Prior to approximately the third anniversary of the issuance of the Series A Preferred Stock, we may, upon the occurrence of certain circumstances described under "Description of Capital Stock—Preferred Stock—Series A Preferred Stock," elect to cause the conversion of all, but not less than all, of the Series A Preferred Stock then outstanding into shares of our common stock. Upon a conversion at our option, in addition to the shares of common stock due upon conversion, holders will be entitled to a provisional conversion dividend make-whole amount, which may be paid by increasing the number of shares of common stock to be issued on conversion. If holders elect to convert any shares of Series A Preferred Stock during a specified period beginning on the effective date of a cash acquisition of us, the conversion rate will be adjusted under certain circumstances and holders will also be entitled to a cash acquisition dividend make-whole amount, which may be paid by increasing the number of shares of common stock to be issued on conversion. Dividends on our Series A Preferred Stock are payable quarterly in arrears in cash, shares of our common stock or a combination thereof at our election when declared by our board of directors. Under certain circumstances, we may not be allowed to pay dividends on the Series A Preferred Stock in cash, including pursuant to debt financing arrangements we may have in place or because we do not have legally available funds. If this were to occur and such dividend was not otherwise declared prior to approximately the third anniversary of the issuance of the Series A Preferred Stock, any such accumulated and unpaid dividend would be payable in shares of our common stock on approximately the third anniversary of the issuance of the Series A Preferred Stock. The conversion of a substantial amount of our Series A Preferred Stock into shares of our common stock or the issuance of substantial amounts of common stock to pay dividends on the Series A Preferred Stock could cause the market price of our common stock to decrease significantly. In addition, the price of our common stock could also be affected by possible sales of our common stock by investors who view the Series A Preferred Stock as a more attractive means of equity participation in our company and by hedging or arbitrage trading activity that may develop involving our common stock. In connection with this offering, Rio Tinto America has entered into a lock-up agreement that prevents the sale of its shares of our common stock for up to 180 days after the date of this prospectus, subject to carve-outs and an extension in certain circumstances as set forth in "Underwriting."

        Following the expiration of the lock-up, Rio Tinto America will have the right, subject to certain conditions, to require us to register the sale of any shares held by them under the federal securities laws. See "Separation Transactions and Related Agreements—Separation-Related Agreements—Registration Rights Agreement." Any such filing or the perception that such a filing may occur, could cause the prevailing market price of our common stock to decline and may impact our ability to sell equity to finance our operations or make strategic acquisitions.

        We intend to file a registration statement with the Securities and Exchange Commission covering securities which may be issued under our stock incentive plans. A decline in the trading price of our common stock due to the occurrence of any future sales might impede our ability to raise capital through the issuance of additional shares of our common stock or other equity securities and may cause you to lose part or all of your investment in our shares of common stock.

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The rights of our common shareholders are subject to, and may be adversely affected by, the rights of the holders of the Series A Preferred Stock, including voting and preference rights.

        The holders of our Series A Preferred Stock are entitled to vote on all matters submitted to a vote of the holders of our common stock, as a single class with holders of common stock, on an as converted basis, as though such shares of Series A Preferred Stock had been converted into common stock at the minimum conversion rate of shares of common stock for each share of Series A Preferred Stock. The interests of the holders of our Series A Preferred Stock may differ from those of our holders of our common stock, and accordingly these voting rights may lead to adverse consequences for holders of our common stock. The Series A Preferred Stock also has separate class voting rights that require the consent or approval of holders of 66²/3% of the Series A Preferred Stock as to any amendment of our restated certificate of incorporation that authorizes any class or series of stock ranking senior to the Series A Preferred Stock or that materially and adversely affects the rights, preferences, privileges and voting powers of the Series A Preferred Stock. In addition, the holders of our Series A Preferred Stock have the right to appoint two persons to our board of directors if dividends on the Series A Preferred Stock are in arrears for six or more quarterly periods (whether or not consecutive); provided that at any time the holders of our Series A Preferred Stock have such right, such holders shall not be entitled to vote for directors with holders of our common stock. This voting right and the terms of the two directors so elected will continue until such time as the dividend arrearage on the Series A Preferred Stock has been paid in full. As a result of these separate class voting rights, it is possible for the holders of our Series A Preferred Stock to exercise a disproportionate control in voting rights.

        The Series A Preferred Stock will rank senior to all of our common stock with respect to dividend rights and rights upon our liquidation, winding-up or dissolution. As a result, holders of our Series A Preferred Stock have the right to receive dividends before holders of our common stock receive their dividend and, in the event of our liquidation, winding-up or dissolution, the holders of the Series A Preferred Stock would be entitled to receive distributions in preference to the holders of our common stock.

Anti-takeover provisions in our charter documents could discourage, delay or prevent a change in control of our company and may adversely affect the trading price of our common stock.

        Certain provisions that will be included in our amended and restated certificate of incorporation and amended and restated bylaws may discourage, delay or prevent a change in our management or a change in control over us that shareholders may consider favorable. Among other things, our amended and restated certificate of incorporation and amended and restated bylaws will:

•

authorize the issuance of "blank check" preferred stock that could be issued by our board of directors to thwart a takeover attempt;



•

do not provide for cumulative voting;



•

provide that vacancies on the board of directors, including newly created directorships, may be filled only by a majority vote of directors then in office;



•

limit the calling of special meetings of shareholders;



•

provide that shareholder action may only be taken by unanimous written consent;



•

require supermajority shareholder voting to effect certain amendments to our certificate of incorporation and our bylaws; and



•

require shareholders to provide advance notice of new business proposals and director nominations under specific procedures.

        See "Description of Capital Stock—Anti-Takeover Effects of Certain Provisions of Our Certificate of Incorporation and Bylaws and Delaware Law."

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

        This prospectus contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "potential," "should," "will," "would" or similar words. You should read statements that contain these words carefully because they discuss our plans, strategies, prospects and expectations concerning our business, operating results, financial condition and other similar matters. We believe that it is important to communicate our future expectations to our investors. Our forward-looking statements include, but are not limited to, information in this prospectus regarding our reserves, the LBA acquisition process, our business and growth strategy, expectations for pricing conditions and demand in the U.S. and foreign coal industries and in the PRB, our ability to operate our business as a stand-alone company and market data related to the domestic and foreign coal industry. In particular, there are forward-looking statements under "The Coal Industry," "Business—Business Strategy" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." There may be events in the future, however, that we are not able to predict accurately or control. The factors listed under "Risk Factors," as well as any cautionary language in this prospectus, provide examples of risks, uncertainties and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Before you invest in our common stock, you should be aware that the occurrence of the events described in these risk factors and elsewhere in this prospectus could have a material adverse effect on our business, results of operation and financial position. Any forward-looking statement made by us in this prospectus speaks only as of the date on which we make it. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

        The following factors are among those that may cause actual results to differ materially from our forward-looking statements:

•

the contract prices we receive for coal;



•

market demand for domestic and foreign coal, electricity and steel;



•

future economic or capital market conditions;



•

our ability to produce coal at existing and planned operations;



•

the availability and cost of LBA acquisitions and surface rights;



•

the consummation of financing, acquisition or disposition transactions and the effect thereof on our business;



•

the impact of our separation transactions;



•

our plans and objectives for future operations and the acquisition or development of additional coal reserves or other acquisition opportunities;



•

our relationships with, and other conditions affecting, our customers;



•

timing of reductions or increases in customer coal inventories;



•

long-term coal sales arrangements;



•

risks in coal mining;



•

environmental laws and regulations, including those directly affecting our coal mining and production, and those affecting our customers' coal usage;

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•

future legislation and changes in regulations or governmental policies or changes in interpretations thereof;



•

the number of coal-fired plants built in the future versus expectations;



•

weather conditions or catastrophic weather-related damage;



•

changes in energy policy;



•

competition;



•

coal's domestic and foreign market share of electricity generation;



•

the availability and cost of competing energy resources, including changes in the price of oil generally;



•

railroad and other transportation performance and costs;



•

disruptions in delivery or changes in pricing from third-party vendors of raw materials and other consumables which are necessary for our operations, such as explosives, petroleum-based fuel, tires, steel and rubber;



•

our ability to obtain services that have otherwise been provided by members of the Rio Tinto Group;



•

our assumptions concerning coal reserve estimates;



•

our existing or future indebtedness;



•

employee workforce factors;



•

regulatory and court decisions;



•

changes in postretirement benefit and pension obligations;



•

our assumptions concerning our reclamation and mine closure obligations;



•

our liquidity, results of operations and financial condition; and



•

other factors, including those discussed in "Risk Factors."

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USE OF PROCEEDS

        We will not receive any of the proceeds from the sale of shares by Rio Tinto America in this offering or if the underwriters exercise their overallotment option. We will also not receive any of the proceeds from the sale of the Series A Preferred Stock in the concurrent offering.

DIVIDEND POLICY

        Our board of directors does not anticipate authorizing the payment of cash dividends on our common stock in the foreseeable future. Any determination to pay dividends to holders of our common stock in the future will be at the discretion of our board of directors and will depend on many factors, including our financial condition, results of operations, general business conditions, contractual restrictions, capital requirements, business prospects, restrictions on the payment of dividends under Delaware Law, and any other factors our board of directors deems relevant. We have not historically paid dividends to Rio Tinto.

        Our Series A Preferred Stock will pay on a cumulative basis when, as and if declared by our board of directors, dividends at a rate of        % of the liquidation preference of $50 per share, payable quarterly in arrears in cash, shares of our common stock or a combination thereof at our election when declared by our board of directors. Any determination to pay dividends on our Series A Preferred Stock, and whether to pay in cash or common stock, will be at the discretion of our board of directors and will depend on many factors, including financial condition, results of operations, general business conditions, contractual restrictions, capital requirements, business prospects, restrictions on the payment of dividends under Delaware law, and any other factors our board of directors deems relevant.

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SEPARATION TRANSACTIONS AND RELATED AGREEMENTS

        Prior to the completion of this offering and the concurrent offering our business was conducted by RTEA, a direct wholly owned subsidiary of Rio Tinto America. RTEA owned Rio Tinto America's western U.S. coal business consisting of five coal mines, including the interest in the Decker mine, as well as certain other businesses, including the Colowyo mine and the uranium property. In connection with this offering, Rio Tinto America:

•

distributed out the Colowyo mine entities and the uranium property entities from RTEA to Rio Tinto America. These businesses will not be transferred to Cloud Peak Energy in connection with this offering; and



•

will transfer to Cloud Peak Energy the remaining western U.S. coal business immediately prior to this offering.

Corporate History

        The Rio Tinto Group initially formed RTEA in 1993 as Kennecott Coal Company which was subsequently renamed Kennecott Energy and Coal Company. Between 1993 and 1998, RTEA acquired the Antelope, Colowyo, Jacobs Ranch and Spring Creek coal mines, the Cordero coal mine and the Caballo Rojo coal mine, which are currently operated together as the Cordero Rojo coal mine, and a 50% interest in the Decker coal mine, which is managed by a third-party mine operator. In 2006, Kennecott Energy and Coal Company was renamed Rio Tinto Energy America Inc., as part of Rio Tinto's global branding initiative.

Formation of Cloud Peak

        Cloud Peak Energy Inc. was incorporated in Delaware on July 31, 2008 in preparation for this offering. Prior to this offering, it did not engage in any activities, except in preparation for this offering, and has had no operations. Rio Tinto America currently owns all of the issued and outstanding

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common stock of Cloud Peak Energy Inc. The diagram below depicts our summarized organizational structure prior to this offering:

Separation of Certain Businesses from Us

        In order to separate certain businesses from us, on October 7, 2008, Rio Tinto America distributed out the Colowyo coal mine entities and the uranium property entities from RTEA to Rio Tinto America. As a result, RTEA and RTEASC, a subsidiary of Rio Tinto America that provides services and other support to RTEA, own and operate Rio Tinto America's western U.S. coal business, except for the Colowyo mine in Colorado. Due to the terms, conditions and other restrictions contained in the existing financing arrangements with respect to the Colowyo mine, the Colowyo mine will not be transferred to Cloud Peak Energy.

Separation of Our Business from Rio Tinto America

        Immediately prior to the closing of this offering and the concurrent offering, in order to separate RTEA and RTEASC from Rio Tinto America, we will engage in a merger transaction, after which

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RTEA and RTEASC, as the surviving entities of the merger, will become wholly owned subsidiaries of Cloud Peak Energy Inc. As consideration for the stock of RTEA and RTEASC, Rio Tinto America will receive:

•

100% of the outstanding shares of our common stock (except for those shares already owned by Rio Tinto America). For a description of the terms of our common stock, see "Description of Capital Stock—Common Stock."



•

100% of the outstanding shares of our Series A Preferred Stock. For a description of the terms of our Series A Preferred Stock, see "Description of Capital Stock—Preferred Stock—Series A Preferred Stock." Rio Tinto America is offering all of its shares of our Series A Preferred Stock for sale in the concurrent offering.



•

$             million in cash. We intend to enter into a credit agreement and/or undertake other financing transactions with one or more lenders. We plan to use the funds we receive through third-party financing to make this cash payment to Rio Tinto America.

        In addition, in connection with the merger transaction, we will assume certain liabilities of Rio Tinto and enter into the Tax Receivable Agreement and the Registration Rights Agreement with Rio Tinto America, among other separation-related agreements.

        We will issue our common stock and Series A Preferred Stock to Rio Tinto America in a private offering in reliance on the exemption from registration requirements provided by Section 4(2) under the Securities Act.

        Prior to the completion of this offering and the concurrent offering, Rio Tinto America will own 100% of our common stock and our Series A Preferred Stock. Upon completion of this offering and the concurrent offering, Rio Tinto America will beneficially own approximately            % of our outstanding common stock, assuming the underwriters' over-allotment option is not exercised (            % if the underwriters' over-allotment option is exercised in full), and no shares of our outstanding Series A Preferred Stock. Rio Tinto America has informed us that, after the completion of this offering, it intends, subject to market conditions, to divest its remaining interest in us. The diagram

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below depicts our summarized organizational structure immediately after the separation and the completion of this offering and the concurrent offering:

Separation-Related Agreements

        In connection with our separation from Rio Tinto America, we are entering into various agreements governing our relationship with Rio Tinto America and its affiliates as a stand-alone public company.

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        We summarize these agreements below, which summaries are qualified in their entirety by reference to the full text of the agreements which are filed as exhibits to the registration statement of which this prospectus is a part.

Master Separation Agreement

        Prior to the completion of this offering, we will enter into a Master Separation Agreement with Rio Tinto America. The Master Separation Agreement will set forth our agreements with Rio Tinto America regarding the principal arrangements required to transfer to us Rio Tinto America's western U.S. coal business, other than the Colowyo mine entities and the uranium property entities. It also will set forth other agreements governing our relationship after the separation.

        Except as expressly set forth in the Master Separation Agreement or in any other transaction document, neither we nor Rio Tinto America will make any representation or warranty as to the assets, businesses or liabilities transferred, assumed or acquired as part of the separation. Except as expressly set forth in any transaction document, all assets will be transferred on an "as is," "where is" basis, and we and our subsidiaries will agree to bear the economic and legal risks that any conveyance was insufficient to vest in us good title, free and clear of any security interest or other encumbrance, and that any necessary consents or approvals are not obtained or that any requirements of laws or judgments are not complied with.

Financial Information

        We will agree to provide certain financial information related to our business on an IFRS basis and information regarding our reserves to Rio Tinto America or its affiliates for so long as Rio Tinto America or its affiliates are required to account for their investment in us on a consolidated basis or under the equity method of accounting. The agreement will also contain covenants requiring us to disclose on a timely basis information about us to, or otherwise cooperate with, Rio Tinto or its affiliates in connection with any information needed by Rio Tinto or any of its affiliates for preparation of their filings or reports with any governmental authority, national securities exchange or otherwise made publicly available, among other covenants.

Exchange of Other Information

        The Master Separation Agreement will also provide for other arrangements with respect to the mutual sharing of information between us and Rio Tinto America and its affiliates in order to comply with reporting, filing, audit or tax requirements, for use in judicial proceedings, and in order to comply with our respective obligations after the completion of this offering. We will also agree to provide mutual access to historical records relating to our businesses.

Release and Indemnification

        Except for each party's obligations under the Master Separation Agreement, the other transaction documents and certain other specified liabilities, we and Rio Tinto America will release and discharge each other and each of our affiliates from all liabilities existing or arising between us on or before the separation, including in connection with the separation and this offering. The release does not include obligations or liabilities under any agreements between us and Rio Tinto America or its affiliates that remain in effect following the separation.

        We will indemnify Rio Tinto America for claims and liabilities related to our business whether arising before, on, or after the separation, and liabilities relating to any untrue statement of, or omission to state a material fact in any registration statement or prospectus or offering document related to this offering or the concurrent offering or offering of debt securities, except for statements or omissions relating exclusively to Rio Tinto plc or information relating to and provided by any

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underwriter expressly for use in the registration statement or prospectus. In addition, Rio Tinto America will agree to indemnify us for claims and liabilities related to the Colowyo mine and the uranium business, which will not be transferred to Cloud Peak Energy in connection with this offering. Rio Tinto America will also indemnify us for liabilities relating to any untrue statement of, or omission to state a material fact in any registration statement or prospectus related to this offering or the concurrent offering or offering of debt securities relating exclusively to Rio Tinto plc.

Expenses of the Separation and Our Initial Public Offering and the Concurrent Offerings

        Rio Tinto America or an affiliate of Rio Tinto America will pay for our benefit all out-of pocket costs and expenses (including all underwriting fees, discounts and commissions and other direct costs) incurred in connection with our separation from Rio Tinto America, this offering, the concurrent offering or offering of debt securities and in connection with the other debt and credit facilities described in this prospectus or that we have entered into or intend to incur or enter into concurrently with or shortly after the completion of this offering.

Corporate Opportunities

        Rio Tinto will continue to hold certain coal assets in the U.S. and abroad following the completion of this offering. The Colowyo mine in Colorado will not be transferred to Cloud Peak Energy but has been included in our historical business and may compete with our continuing business. Rio Tinto may expand, through development of its remaining coal business, acquisitions or otherwise, its operations that directly or indirectly compete with us. The Master Separation Agreement will provide that for one year following the completion of this offering, Rio Tinto America or its affiliates will not pursue any competitive activity or acquisition in the coal industry within the PRB. Rio Tinto America and its affiliates will not be prohibited from pursuing any competitive activity or acquisition outside of the PRB, whether during or after this one-year period. Following the completion of this offering, if a corporate opportunity is offered to Rio Tinto America or its affiliates or one or more of Rio Tinto America's or its affiliates' executive officers or directors that relates to any competitive activity or acquisition in the coal industry:

•

within the PRB after the one-year period referred to above; or



•

outside of the PRB,

no such person shall be liable to us or any of our shareholders (or any affiliate thereof) for breach of any fiduciary or other duty by reason of the fact that the person, including Rio Tinto and its affiliates, pursues or acquires the business opportunity, directs the business opportunity to another person or fails to present the business opportunity, or information regarding the business opportunity, to us, unless, in the case of any person who is a director or officer of us, the business opportunity is expressly offered to the director or executive officer in his or her capacity as an executive officer or director of our company. See "Description of Capital Stock—Corporate Opportunities."

Non-Solicitation

        We will agree with Rio Tinto America and its affiliates that for a period of 12 months following the completion of this offering and the concurrent offering, neither we nor Rio Tinto America nor its affiliates will solicit any employee of the other company, subject to certain exceptions.

Other Provisions

        The Master Separation Agreement also will contain covenants between us and Rio Tinto America and its affiliates with respect to, among other covenants:

•

confidentiality of our and Rio Tinto America's information;

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•

restrictions on our ability to take any action that limits Rio Tinto America's or any of its affiliates ability to freely sell, transfer, pledge or otherwise dispose of our stock; and



•

cooperation with respect to litigation.

Merger Agreement

        We intend to enter into a Merger Agreement whereby two of our wholly owned subsidiaries will merge with and into RTEA and RTEASC, after which RTEA and RTEASC, as the surviving entities, will be our wholly owned subsidiaries.

Transition Services Agreement

        Historically, members of the Rio Tinto Group have provided key services to us, including services related to treasury, accounting, procurement, legal services, information technology, employee benefit and welfare plans, among other services. Prior to the completion of this offering, we will enter into a Transition Services Agreement with an affiliate of Rio Tinto pursuant to which this Rio Tinto affiliate will agree to continue to provide us with certain of these key services for a transition period of approximately nine months.

        Pursuant to the Transition Services Agreement, the Rio Tinto affiliate will provide services to us, including:

•

treasury, accounts payable and other financial related services;



•

benefit administration and other employee benefit related services;



•

information technology, network and related services; and



•

certain limited procurement and sourcing support activities.

We also will agree with the Rio Tinto affiliate that, if any additional transition services are needed to comply with applicable laws or to satisfy accounting standards, upon our mutual agreement, these additional services will be provided at the cost of the party requesting these additional services.

        We have agreed to pay the Rio Tinto affiliate for such services as set forth in the Transition Services Agreement. We expect that the total amounts paid to the Rio Tinto affiliate under the Transition Services Agreement will be approximately $                        per month. However, if the term of any service provided under the agreement is extended or if there is a material change in the assumptions used by us and the Rio Tinto affiliate in determining the costs to be charged for the service, the amounts payable to the Rio Tinto affiliate may be adjusted accordingly as mutually agreed to by us and the Rio Tinto affiliate.

        The services provided under the Transition Services Agreement will terminate at various times specified in the agreement (generally ranging from three months to nine months). However, we may elect to terminate the provision of any or all of the transition services upon 60 days notice to the Rio Tinto affiliate. In addition, the Rio Tinto affiliate may immediately terminate the Transition Services Agreement if we fail to make any payment due to the Rio Tinto affiliate within 30 days after receipt of written notice of this failure, except with respect to amounts in issue that are subject to a bona fide dispute between us and the Rio Tinto affiliate.

Tax Receivable Agreement

        This offering and related transactions are expected to increase our subsidiaries' tax bases in their tangible and intangible assets, as well as our basis in the equity of our subsidiaries. These increases in tax basis are expected to increase depreciation, amortization and cost depletion deductions and therefore reduce the amount of tax that we would otherwise be required to pay in the future, although

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