Alpha will pay North Carolina-based Progress Energy $US23 million and assume $8 million in reclamation liabilities for the mining operations owned by subsidiaries Diamond May Coal Co and Kentucky May Coal Co.

The operations are adjacent to Alpha's Enterprise business unit and will be integrated with Enterprise, the company said.

Progress subsidiary Diamond May operates two surface and two underground mines in Kentucky, employing 380 union-free employees. Production in 2005 was approximately 3 million tonnes of steaming coal.

Diamond May controls an estimated 55.5 million tonnes of proven and probable surface and underground reserves, including the undeveloped Elkhorn 2 block containing more than 35 million tonnes. A 700 tonne-per-hour preparation plant and loadout facility on the CSX railroad is also included in the deal.

Kentucky May Coal Co owns an estimated 17.8 million tonnes of proven and probable underground reserves, most of which are high in Btu content and low in sulfur. It has no current active mines.

“This acquisition will more than double our reserve base in eastern Kentucky," said Michael J Quillen, Alpha's president and CEO.

“What we learned from acquiring and quickly integrating the Callaway coal operations last October will help us with Progress. Like Callaway, these are the type of operations that meet our acquisition criteria, and they should benefit from being managed by one of our best business units, Enterprise."

Alpha plans to develop a slope and shaft into the underground Elkhorn 2 reserve over the next two years, with first production expected in 2008. Alpha said from a rail transportation standpoint, Elkhorn 2 was advantageously positioned with the growing utility scrubber market in the Southeast.

The company expects to use its revolving credit facility to finance the transaction, which it sees closing by May 1.