Under the agreement, Radar will hold 49% of the new company while the remainder will be owned by two undisclosed Alabama-based miners.

Radar paid $US1 million for share ownership, while the partners will contribute the mining rights of one active and two pending mining permits as well as two mining leases.

The deal also outlines that the Alberta-based company will have a 36-month option to purchase a 51% stake in a private Alabama producer for $US1.5 million.

The transaction, pending regulatory approval, is expected to close by the end of October.

"This is an exciting development as Radar anticipates commencement of coal operations in early November 2009 and anticipates generation of cash flow from this investment in an operating coal mine upon closing of the transaction," Radar chief executive Timothy Bergen said.

The company said the partnership would help identify, acquire and develop additional coal properties complementary to Radar’s two projects currently under development: the Buick Coal Project in Colorado, which contains a resource estimate of 291 million tons of indicated and inferred lignite, and the RPS Fuels joint venture.

The single active mining permit covers 130 acres, and two pending permits encompass 224 acres and 16 acres, respectively.

The latter permits are anticipated to be issued within 90 days and are adjacent to the active permit. All are in coal-rich Jefferson County in the Warrior Coal Basin.

“The target seams at the facility are the Mary Lee (typically high-value steam coal), and Blue Creek (typically metallurgical coal) seams of the Mary Lee Coal Group,” officials for the partnership noted.

Blue Creek is also home to the large No. 4 and No. 7 underground coal operations owned by Jim Walter Resources.

RAC Mining will also hold two mining leases in Franklin, Marion and Winston Counties, the first for 80 acres on adjacent lands and another for approximately 640 acres.

Permitting is in process for the latter with issuance expected in the first quarter of 2010.