Foundation said as per the agreement, ArcelorMittal would take delivery of “significant volumes” of metallurgical coal from the producer’s Kingston mine this year and beyond.

"The negotiated settlement agreement is fair to both parties, provides greater visibility and certainty to Foundation, and represents an important step forward in the relationship between the two companies, which we hope will be long-lasting and successful going forward," Foundation chairman James Roberts said.

The company has released an updated guidance to reflect the impact of the settlement as well as take into account new business and other changes.

This year Foundation expects an average $US62.06 per ton from its eastern mines – a drop from initial expectations of $65.10/t – based on 17-18Mt of output (70-71Mt overall).

However, the expected price per ton next year will go up from $68.11 to $74.85 and from $78.82 to $82.92 in 2011. The company is currently 99% committed and priced this year, 75% for next year and 48% for 2011.

Foundation said last Friday it would slash production levels at its Kingston, Pax and Paynter Branch complexes and temporarily lay off 60 workers.

"We regret the need to take these actions and the resulting impacts upon the affected employees and their families,” Roberts said.

“Unfortunately, we must recognise the current imbalance between demand and supply and take appropriate measures.”

The company did not reveal how much tonnage would be cut, but noted it would be “within the range anticipated in the revised shipment guidance provided on our first-quarter earnings call and [we] do not change our expectations for full-year 2009 shipments".

Earlier this month, it was announced that master limited partnership Alpha Natural Resources would purchase Foundation in a $US1.4 billion deal, creating the third-largest coal producer in the US behind Arch Coal and Peabody Energy.

The all-stock transaction will give the merged company a total of 59 coal mines, 14 preparation plants and 2008 pro forma revenues of $US4.2 billion.

It will retain the Alpha name and be headquartered in Abingdon, Virginia.