Coal producer Arch Coal Inc. (ACI) said Thursday that it has completed the acquisition of Rio Tinto's Jacobs Ranch mine for about US$764 million, which differs from the original price of US$761 million, due to slight adjustments in the closing working capital balance.
Following the acquisition, the company plans to integrate Jacobs Ranch into its existing Black Thunder mine and expects to complete the integration by the end of the year. Further, Arch Coal said it expects to record roughly $8 million in one-time acquisition-related expenses in its fourth quarter.
According to St. Louis, Missouri-based Arch Coal, the transaction will lead to further expansion of its size, scale and strategic position in the Powder River Basin.
Steven Leer, Arch's chairman and chief executive officer said, "Jacobs Ranch is the perfect addition to Arch's flagship Black Thunder operation as the mines share a six mile property line and have adjacent mining facilities along with complementary pit operations."
As per the deal, the acquisition includes 381 million tons of low-cost, low-sulfur coal reserves that are adjacent to Arch's Black Thunder mine. Other assets acquired in the transaction consist of a high-speed rail loadout, an overland conveyor and near-pit crushing system, a 120-cubic-yard dragline, eight large electric shovels, more than 40 large haul trucks and a dedicated and experienced workforce, the company said.
In addition, sales contracts include Jacobs Ranch's 35 million tons of production committed and priced in 2010 and 21 million tons of production committed and priced in 2011.
The combined mine, following the integration, will have assigned coal reserves of 1.6 billion tons and productive capacity of more than 140 million tons per year, the company noted. Arch also estimates synergies from the transaction of between $45 million and $55 million annually, from the year 2010.
The company said it financed the acquisition with a combination of new debt and equity offerings completed in August.
In its fourth quarter, Arch expects to record roughly $8 million in one-time acquisition-related expenses, associated with severance costs, advisory and legal fees as well as other costs from the integration of the operations.
The company said that Jacobs Ranch had produced 42.1 million tons of high-quality sub-bituminous coal for sale to U.S. power generators in 2008.
"Arch plans to integrate Jacobs Ranch - which is the third largest coal mine in the United States based on 2008 production - into the company's existing Black Thunder mine, creating what we believe will be the largest single coal-mining complex in the world," added Leer.
ACI closed Wednesday's regular trading at $22.13 on the NYSE.
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