Peabody said the acquired properties in Illinois and Indiana had significant synergies with other Peabody subsidiaries, enabling lower-cost mining and longer mine lives.

Purchased assets included about 10Mt of reserves, a preparation plant, mining equipment and facilities near Coulterville, Illinois. The newly formed Coulterville Coal Company can also access adjacent Peabody coal reserves.

The mine is expected to begin production in 2005 and will produce about 2Mt per annum when it reaches full capacity in 2006.

The mine will supply coal under a new agreement with Northern Indiana Public Service Company with terms that can be extended through 2015.

In Knox County, Indiana, Peabody acquired approximately 40Mt of coal reserves, a preparation plant, facilities, and a shovel and other mobile mining equipment.

The assets will be operated by Peabody subsidiary Black Beauty Coal Company's Miller Creek Mine, which is expected to access the surface reserves in 2006.

In Sullivan County, Indiana, the company purchased about 20Mt of reserves, a preparation plant, significant surface land reserves, a large dragline and other mobile mining equipment.

The assets will be operated by Black Beauty's Farmersburg Mine. Development of the operation is targeted for 2007.

“Strong growth and long-term demand for Illinois Basin coal and increased investments in technologies allows Peabody to further expand its leadership position in the region,” Peabody said.

The transaction is expected to be accretive to earnings in 2006.