Alliance Resource Partners has entered into a transaction with White Oak Resources and related entities to support the development of a longwall mining operation currently under construction near McLeansboro in Hamilton County in the US state of Illinois.

The transaction features several components, including a preferred equity investment, the acquisition and leaseback of reserves and surface rights, a coal handling and services agreement, and a backstop equipment financing facility.

Including an initial investment at closing of $69.5m, Alliance Resource currently expects its total investment in the project in a range of $400m – $525m to be funded over the next three to four years.

White Oak plans to develop and operate Mine No. 1 as a longwall mining operation to access about 200 million tons from the Herrin No. 6 coal seam.

Construction of Mine No. 1 is underway and White Oak currently expects that the longwall production will begin in the 2014 timeframe.

White Oak currently estimates that Mine No. 1 will produce about six to 6.5 million tons of coal per year, which the company intends to market in the domestic and export thermal coal markets.