Arch Coal, Inc. (NYSE:ACI) plans to buy a coal mine in Wyoming’s Powder River Basin from Rio Tinto plc (NYSE:RTP) for $761 million. The Jacobs Ranch mine includes 381 million tons of coal reserves and produced 42.1 million tons in 2008. It lies adjacent to another mine, Black Thunder, already owned by Arch.
Arch predicts that the acquisition will add between $145 million and $165 million to the company’s EBITDA in 2009. Virtually all of the mine’s production for 2009 is committed and priced, and about 75% of 2010 production and 50% of 2011 is also committed and priced.
The combined mines are expected “to create significant operating synergies.” Jacobs Ranch employs 600 people, and Arch declared that these employees “will be a tremendous addition to our company.”
The company apparently expects to reduce costs because of the proximity of the mines to one another. That seems pretty iffy.
Rio Tinto, which recently agreed to sell a 9% stake in the company to China’s Chinalco for $19.5 billion, gets some much needed cash, and lowers its operating expenses without having to fire anybody. Not bad in today’s world.
Paul Ausick
March 9, 2009
It’s Your Money, Your Future—Own It (sponsor)
Retirement can be daunting, but it doesn’t need to be.
Imagine having an expert in your corner to help you with your financial goals. Someone to help you determine if you’re ahead, behind, or right on track. With SmartAsset, that’s not just a dream—it’s reality. This free tool connects you with pre-screened financial advisors who work in your best interests. It’s quick, it’s easy, so take the leap today and start planning smarter!
Don’t waste another minute; get started right here and help your retirement dreams become a retirement reality.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
Our expert who first called NVIDIA in 2009 is predicting 2025 will see a historic AI breakthrough.
You can follow him investing $500,000 of his own money on our top AI stocks for free.