The company, which has a strong presence in central and southern Appalachia, is expected to close the purchase agreement for the Straight Creek complex before the end of the first quarter.

"We considered competing bids for the Straight Creek property before selecting the offer made by Xinergy," National Coal president Daniel Roling said. Xinergy was founded by former National Coal director Jon Nix.

The deal, Roling added, is part of the company's strategic plan to focus on higher growth potential properties that offer a higher margin.

"This sale will facilitate a number of positive changes for us. It will improve liquidity, strengthen our balance sheet with the early repayment of debt, and allow us to focus our production activities on those properties that we believe give us greater flexibility to react to the growing demand for coal we expect to experience this year."

When the transaction closes, National Coal will have left total production of about 2 million tons of coal, split nearly down the middle between its holdings in Tennessee and Alabama.

Looking forward, National Coal has committed 1.5Mt next year and 630,000t in 2010 under contract.

Straight Creek produced 300,000t last year.

Additionally, Roling said there was opportunity in the two states to increase coal production and sales, especially given a coal market that is on the upswing.

"The company is well positioned to increase production from previously idled facilities including mines, preparation plants, and railroad load-outs. In addition, we have a number of properties in advanced stages of permitting, which we should be able to start-up to meet incremental demand from the current strong coal market."