Included in the cash deal are the active Sufco and Skyline longwall mines as well as the Dugout Canyon room and pillar operation, which Arch has called non-core assets to its portfolio.

Arch will retain the Mountain Coal Company West Elk mine in Colorado and about 300 million tons of coal reserves in the Western Bituminous Region, including reserves in southern Wyoming.

In all, Bowie – which will be known as Bowie Resource Partners – will add about 105 million tons of bituminous coal reserves.

Officials for the Kentucky-headquartered miner said all 725 miner positions would remain in place, and it would have a total workforce of 11 employees with its annual production capacity of 15 to 17 million tons.

While the transaction was subject to customary adjustments for working capital and other items, both companies have approved the deal and it was expected to close in the third quarter.

Arch president and chief executive officer John Eaves said the sale enhanced value for its shareholders.

“As part of our strategy, we have been diligently focused on optimizing our asset base, expanding our coal export network, reducing our discretionary capital spending and re-aligning our portfolio for growth,” he said.

“With this transaction, we're delivering on a number of these initiatives while also enhancing our financial flexibility."

The purchase meets a significant objective for Bowie as well, according to principal owner John Siegel.

“From the inception of our ownership of Bowie, our goal has been to establish a core business rooted in the Western Bituminous Region and to grow it, not only organically but with synergistic acquisitions," Siegel said.

“In that context, it would be hard to imagine a more logical next step in our evolution than the purchase of these superior Canyon Fuel mines.”

Looking ahead, Eaves said the sale would help it to focus on value-enhancing objectives such as building out and upgrading its Appalachian metallurgical coal platform as well as optimizing low-cost thermal coal holdings for domestic and international markets.

“Our Utah operations have generated more than $600 million in free cash flow for Arch since 1998 and have created significant value for our company,” he said.

“But we believe that monetizing these assets now, before investing meaningful additional capital, is the right course of action for our shareholders.”

Eaves also said the sale would pull forward multiple years of expected cash flows for the company, reducing future capital outlays and increasing liquidity to enhance overall financial flexibility.

Additionally, it positioned the company for future debt reduction as coal markets improved, he said.

As a result of the sale, Arch expects to gain cumulative capital and administrative cost savings of more than $200 million from 2014 through 2017.

Arch chief operating officer Paul Lang said it opted to retain the West Elk complex because of its ties to the seaborne thermal market.

West Elk sold 6.7 million tons of high-quality, low-sulfur coal last year, with roughly 40% of it shipped into the export market.

“West Elk is a valuable, low-cost asset with a broad market reach that includes customers in the eastern and western United States and in the international arena," Lang said.

Going forward, Bowie will get to continue its long-standing presence in the Western Bituminous region, an area where it holds significant knowledge and experience with opportunities, challenges and the specific customer base.

“We thank the talented employees of Canyon Fuel for their significant contributions to Arch's success over the past 15 years, including upholding exemplary safety and stewardship practices, providing countless hours of service and making many generous donations to local communities,” Siegel said.

“We are confident that they will continue this track record of excellence as Bowie employees.

“We are proud to bring these two skilled teams together, and we believe we have the opportunity to create something very special here."

Bowie has obtained a committed financing arrangement led by Morgan Stanley Senior Funding and Deutsche Bank AG New York Branch to fund the transaction.

Galena Private Equity Resources Fund will provide a $104 million cash investment to acquire a minority equity stake in Bowie and the newly-formed entity.

Arch’s financial advisors on the sales deal are FBR Capital Markets and Deutsche Bank.

Bank of America Merrill Lynch is providing certain financial advisory services to Arch, and Simpson Thacher & Bartlett is providing legal counsel to Arch.

Morgan Stanley is acting as the financial advisor to Bowie, and Baker Botts and Fultz Maddox Hovious & Dickens PLC are their legal counsel.

Trafigura AG will be the exclusive marketing agent for all of BRP’s production.