The metallurgical reserves under the agreement are located near Patriot's Rocklick preparation facility. Rhino Eastern will hold a 51% interest in the project and has contributed reserves as well as $US10.1 million in cash.

The agreement also outlines the purchase of two existing underground operations with a reserve total of 5 million tons from the Eagle seam. Coal from these two mines will go to the Rocklick plant for processing.

By the end of the year, the companies anticipate building production to more than 500,000 annual tons.

“This is another example of a bolt-on transaction that allows us to more fully utilise our extensive reserve base, as well as our existing physical infrastructure," said Patriot chief executive Richard Whiting.

“The project will add more volume to our portfolio of premium high-volatile coking coal for sales to a longstanding base of domestic and international customers."

Patriot currently controls 1.3 billion tons of reserves, both probable and proven, across 10 company-operated mines and several contractor operations in Appalachia and the Illinois Basin.