Arch Coal has completed the acquisition of Rio Tinto's Jacobs Ranch coal mine for a purchase price of approximately $764m, which includes an estimate for working capital adjustments. In 2008, Jacobs Ranch produced 42.1 million tons of sub-bituminous coal for sale to the US power generators.

The acquisition includes 381 million tons of low-sulfur coal reserves (as of December 31, 2008) that are contiguous to Arch’s Black Thunder mine. Other assets acquired in the transaction consist of a 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 workforce.

Additionally, Jacobs Ranch has 35 million tons of production committed and priced in 2010 and 21 million tons of production committed and priced in 2011 under existing sales contracts.

Steven Leer, chairman and CEO of Arch, said: “We are enthusiastic about completing the acquisition of Jacobs Ranch. This transaction further expands Arch’s size, scale and strategic position in the Powder River Basin – the largest, fastest growing and most cost-competitive coal supply region in the nation.

“Arch plans to integrate Jacobs Ranch – which is the third largest coal mine in the US 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.”

Once integrated, the enhanced Black Thunder mine will control six draglines, 22 shovels, more than 130 haul trucks, three rail loadouts and 20 train landing spots. The combined mine also will have assigned coal reserves of 1.6 billion tons (as of December 31, 2008) and productive capacity of more than 140 million tons per year should market conditions warrant, Arch Coal said.

Arch estimates synergies from the transaction of between $45m and $55m annually, beginning in 2010. The company said that its past experience with the 2004 acquisition of the North Rochelle mine and its integration into Black Thunder suggests that these synergies are achievable.

At the time the acquisition was revealed on March 9, 2009, Black Thunder and Jacobs Ranch employed approximately 1,815 people, excluding support personnel. At closing on October 1, 2009, the combined mining complex will operate with 115 fewer positions, and will employ a total of approximately 1,700 people.

Arch financed the acquisition with a combination of new debt and equity offerings completed in August.

Through its network of mines, St Louis-based Arch Coal supplies cleaner-burning, low-sulfur coal to the US power producers. The company also ships coal to domestic and international steel manufacturers, and international power producers.