The final touch is clouds above the volcano (to tell the truth, I added clouds to hide transition between volcano and dragon :-) I was not happy with it). Create new document, with width twice more than height. set foreground to white and background to black. Then apply Clouds filter (Filters menu - Render).
select central part of image, as shown here. Transform (Ctrl-T), holding Alt key, and stretch selection to fill entire document.
Enable Quick Mask (Q key), apply Clouds filter again, disable Quick Mask (Q key again). You should get selection similar to this.
Fill selection with black color (simply hit Ctrl-Backspace for that). Then, set Auto Levels (Ctrl-Shift-L).
Do that again - enable quick mask, apply Clouds filter, disable quick mask, fill selection with black, set auto levels (or, in shortcuts - Q, Ctrl-F, Q, Ctrl-Backspace, Ctrl-Shift-F).
Now we need to remove black from this image. To do so, select all (Ctrl-A), copy (Ctrl-C), enable quick mask (Q), paste (Ctrl-V), disabled quick mask (Q). Note how white parts are selected.
Invert selection (Ctrl-Shift-I) and delete (Del). Then open Hue/Saturation window (Ctrl-U), and set lightness to 100. You should get white clouds on transparent background.