Under the deal, which is expected to close by the end of this month, Ranger will pay cash and assume about $6 million in accounts payable owed to one of its affiliates.

Included in the asset sale are the coal inventories located at the Baldwin preparation facility, the active No. 5A underground mine, the idled No. 3 surface operation and coal mineral rights on about 22,000 acres to be leased to Ranger Energy for a 6-8% royalty.

The producer may also assign a coal contract to the buyer for the facilities.

National said it would receive about $1.9 million in cash previously pledged to secure reclamation bonds and other liabilities associated with the New River Tract operation as well as “minimal” coal inventory payments at the deal’s closing.

The producer will use the proceeds of the transaction to repay a $4.5 million loan of a short-term credit facility that is in default.

National president Daniel Roling said the sale would help the company address short-term liquidity requirements and pay back those vendors which extended it credit after its largest company suspended purchases earlier this year due to a force majeure event.

“We will continue to focus on ways to reduce our expenses and our outstanding debt, as this transaction does not completely solve all of our short-term liquidity issues,” he said.

“We also are continuing to pursue strategic transactions that will allow us to repay our $42 million in public debt, which matures in December 2010.”

Once the transaction closes, National’s continuing operations in Tennessee will include coal mineral and mining rights of approximately 57,000 acres of land, including one active underground and one active surface operation. The producer will still own and operate its sole preparation plant and loadout facility in Tennessee.

Ranger Energy Investments is controlled by Jim Justice.

As of year-end 2009, National Coal reported cash and cash equivalents of approximately $1.2 million and negative working capital of approximately $54.8 million.