Illinois coal will grow in importance in the US

Arch Coal has acquired some 157 Mt of recoverable coal reserves and significant surface acreage in the Illinois Basin from International Coal Group for approximately $38.9 million. Located in Perry and Washington counties, the acquired coal reserves are adjacent to some of Arch’s existing reserves in the region – creating a nearly 300-Mt contiguous reserve block of high-quality, low-chlorine bituminous coal suitable for units equipped with scrubbers. With this addition, the company now controls more than 375 Mt of coal reserves in Illinois.

“This strategic acquisition further enhances Arch’s substantial reserve position in Illinois, a market where Arch has a long and successful history,” said Steven F. Leer, Arch Coal’s Chairman and CEO. “Additionally, this transaction provides a synergistic opportunity with existing reserves that will allow Arch to build a low-cost platform for future growth in the Illinois Basin.”

More than 80% of the acquired underground coal reserves are owned in fee, with the remainder controlled under long-term leases. This transaction also includes extensive ownership rights to overlying surface acreage capable of supporting mine-mouth facilities. Furthermore, the coal reserves are located in close proximity to the Mississippi River to accommodate barge traffic, and are advantageously served by two railroads.

“We expect the Illinois Basin to play a more significant role in U.S. energy markets over the next decade, and envision Arch’s expanded position in the region eventually supporting a mine development for either the domestic utility market or as a stand-alone coal-to-liquids facility, depending on future market conditions,” said Leer.

In addition to company-controlled coal reserves in Illinois, Arch owns an equity interest in Knight Hawk Holdings, a top 10 coal producer in the Illinois Basin based on 2006 production.