Under the agreement Patriot will make 11.9 million shares in Patriot available to Magnum shareholders, as well as assuming a $150 million debt, bringing the total acquisition price to approximately $709 million.

Magnum sold 18.4 million tons of coal in 2007, and has over 600Mt of proven and probable reserves in southern West Virginia.

The combined total proven and probable resources from the two companies amount to more than 1.9 billion tons.

“We believe this presents a unique opportunity to consolidate two significant, complementary coal companies, achieving the benefits of scale and diversity that we believe are critical to further industry consolidation and long-term success in the coal sector," Magnum chief executive Robb Turner said.

The proposed transaction is expected to be completed mid-2008.