The transaction, which includes the operation as well as ancillary equipment and an estimated 9.2 million tons of reserves, is expected to be completed by the end of this month. ANR said the new assets will be a holding of the recently developed Cobra Natural Resources.

Arch chairman Steven Leer said the decision to sell Mingo Logan was an “advantageous” one for the company as well as its shareholders, as Arch seeks to maximise its asset base value.

“This transaction also provides synergistic opportunities for Alpha Natural Resources, whose operations are in close proximity to Mingo Logan,” Leer said.

“The sale of Mingo Logan allows Arch to monetise an asset at an advantageous time and further strengthen our financial flexibility for future growth opportunities.

“We expect Central Appalachia to remain an important operating region for Arch, with our strategic focus centred on our remaining operations, including the new longwall operation at Mountain Laurel.”

Over the course of the last 15 years, Arch officials noted the Mingo Logan longwall’s importance to the Missouri producer.

“[It] and its workforce have contributed significantly to Arch Coal's success,” the company said.

ANR said that its Cobra Natural Resources division is expected to have an output rate of more than 1Mtpa, made up of a combination of Arch's Mountaineer deep mine and its Hernshaw B-1 contract deep mine complex.

Additionally, the company said it has plans to “capitalise on significant synergies” with regards to the new assets with its Callaway Natural Resources business unit, which holds several operations in the immediate vicinity.

To ensure both companies would enjoy the fruits of growth stemming from the transaction, Arch and ANR entered into even more mutually beneficial factors as part of its negotiations: “Currently, Arch is paid a throughput fee for processing and loading coal from Callaway's Premium Energy surface mine. That fee will no longer be incurred,” ANR officials said.

“Also the Premium Energy mine will no longer pay Arch any overriding royalty fees. As part of the agreement with Arch, Alpha obtains an existing fee-based contract with a third party to process and transload coal through Cobra; the facilities have sufficient excess capacity to consider other third-party processing agreements.”

Also included in those “synergies” is an agreement it has with Arch to sell it more than 500,000t of production this year and more than 650,000t next year at market prices. Alpha will also take over Arch’s Black Bear preparation facility and 10Mtpa-capacity loadout services by Norfolk Southern.

The deal is well timed for Arch, which is anticipating the start-up of its Mountain Laurel longwall mine during the fourth quarter of this year. The company estimates its output at prime production levels will be 5Mtpa, key as plans for Mingo Logan’s longwall idling is set for late June.

ANR officials were happy with the multi-faceted deal inked with Arch: “This is a great opportunity and is typical of the bolt-on, complementary acquisitions Alpha has done many times in our brief history,” said company chairman Michael Quillen.

“Arch Coal has created a first-rate facility at Mingo Logan, and we're pleased to acquire these assets as Arch transitions their longwall production to the new Mountain Laurel complex.”

Alpha president Kevin Crutchfield said that its own interests, including financial, are being met in spades with the transaction.

“By blending production from our new Cobra mines with our Callaway surface mine production, we'll be able to maximise price potential of the collective reserves we have in the area,” Crutchfield said.

“Adding in the various fees we no longer will be paying, and factoring in the significant synergies we're obtaining, this acquisition should generate more than $25 million of EBITDA in 2008 as well as significant positive free cash flow.”

He added that about 150 of Mingo Logan’s workers will be retained after the deal is complete.

After both sign off, Arch will continue to hold four complexes in Central Appalachia reporting a total reserve base of 393Mt.