Under the acceleration and release agreement, Cloud Peak has with Rio Tinto, this payment settles all future liabilities that would have been owed under the agreement.

At June 30, Cloud Peak carried an undiscounted liability of $103 million in respect of its estimated future tax receivable agreement obligations and expected to make cash payments of about $14 million each year in 2014 and 2015 and additional payments in subsequent years.

The settlement will mean a non-cash gain during the third quarter of about $58 million before tax and about $37 million after adjustments to the associated deferred tax assets.

Cloud Peak keeps the deferred tax assets related to the step up in tax basis as a result of Rio Tinto’s disposal of the business.

That means Cloud Peak will keep benefiting from increased tax depreciation and does not expect any increase in cash income taxes payable as a result of the transaction.

Cloud Peak executive vice president and chief financial officer said: “Ending the tax receivable agreement will reduce the accounting and audit burden associated with this complex agreement,” he said.

“We see this as an efficient and accretive use of capital and a good opportunity to further manage our balance sheet liabilities.”