The deal will allow Arch Coal to integrate its Powder River Basin located Black Thunder mine with the neighbouring North Rochelle mine, owned by Triton.
"We have always viewed North Rochelle as the principal source of value creation for Arch in this transaction," Steven F. Leer, Arch Coal's president and chief executive officer said. "By integrating the North Rochelle mine and our existing Black Thunder operation, we are creating what we believe will be the premier mine in the nation's fastest growing coal supply region."
The two mines share a 5.5-mile property line and Arch expects the combination to create operating synergies of between US$15 million and US$20 million beginning in 2005. That figure is expected to increase in subsequent years as future mine development for the integrated properties is optimized.
"The addition of North Rochelle enhances our ability to serve our utility and industrial customers with the broadest range of super-compliance, compliance and low-sulfur coal products, as well as the widest array of transportation options," Leer said. "Consequently, we expect this acquisition to further strengthen Arch's standing as a preferred supplier of many of the nation's largest power generators."
North Rochelle is the newest mine in the Powder River Basin, having ramped up to full production less than five years ago. Its reserve base totaled an estimated 226 million tons at December 2003 and it produced an estimated 23.9 million tons of coal in 2003 with an estimated sulfur content of 0.5 pounds of SO2 per million Btu's. In Earnings before interest, taxes, depreciation and amortization were approximately US$41.6 million in 2003.
Arch said North Rochelle's modern rail loadout facility and other infrastructure, as well as its large equipment fleet, greatly add to the value of the transaction.
"We view North Rochelle as an excellent strategic fit with our existing operations, and we look forward to working with the dedicated and professional Triton workforce to achieve a quick and efficient integration," Leer said.
Following the completion of the transaction, Arch finalised the sale of Triton's Buckskin mine to Kiewit Mining Acquisition Company for US$72.9 million.
Leer also reconfirmed Arch's previous earnings guidance of approximately US$0.15 to US$0.25 for the third quarter, excluding any acquisition-related costs.
"We fully expect the addition of North Rochelle to be accretive to earnings beginning with the first quarter of 2005," Leer said. "We will provide more details about the acquisition's expected impact on our financial performance once we have reviewed developments at the mine since the transaction was first announced."
Leer indicated that Arch would provide additional commentary about the acquisition in its third quarter earnings release.
