The agreement is with FirstEnergy and an affiliate of the Bioch Companies. FirstEnergy’s equity investment in the acquisition is $US125 million, with the JV getting 80% of the Bull Mountain operations and 100% of its rail infrastructure.
From that, FirstEnergy will hold a 45% interest, with Bioch holding 55%. After 18 months, the option will be available to them to acquire the remaining 20% interest in the operations.
It is expected the two will spend $450 million on mine development, including mine expansion and equipment as well as a new coal preparation plant. That expenditure also includes plans to establish a 35-mile rail spur to the Burlington Northern Santa Fe railway line.
FirstEnergy also gained another positive from the deal by inking a 15-year agreement to purchase the mine’s coal, up to 10 million tons annually.
It has reached tentative agreements with rail companies which carry output from the mine to generation stations, and will begin taking delivery of the coal in late 2009 or early 2010.
Bull Mountain, the only underground mine in Montana, was given the green light to longwall late last year from the Mammoth seam. According to the company, it is also the last significant contiguous reserve in the continental United States.
“This is a very attractive investment for our company because the assured supply of Bull Mountain coal will help us maximise the generation capacity of our existing fossil generation plants, with significant environmental advantages compared to standard eastern coal," said FirstEnergy president and chief executive Anthony Alexander.
“As a result, we expect this supply to help us meet our customers' growing electricity needs in an environmentally sound manner."
