The deal, which was inked for $US15 million in cash and coal reserves totalling 30 million tons, is effective immediately.

Arch’s Illinois reserve holdings in the region now total 260Mt and Knight Hawk’s control equals 70Mt.

“With its strong management team and skilled workforce, Knight Hawk is well positioned for growth,” said Arch chairman Steven Leer.

“We expect Illinois Basin coal to play an increasingly vital role in US energy markets, and we view this transaction as a first step for Arch in re-entering this important region.”

Knight Hawk expects 2006 shipments to total approximately 3Mt, and meanwhile is planning to expand its production to 5Mt by 2008.

Arch, the country’s second largest producer, makes up about 12% of the US coal supply and approximately 6% of the fuel for the country’s generated electricity supply through its 12 mining complexes in six states.