The producer has entered into long-term deals with two Midwest-based power generation companies for over 90 million tons of coal from its 8Mtpa Bear Run operation under development in Sullivan County, Indiana.

Peabody said the contracts with the utility companies have terms of up to 17 years.

Bear Run is expected to start production during the latter half of this year, and produce 2Mt to 3Mt next year, ramping up thereafter to the 8Mtpa target.

Peabody chairman and chief executive officer Gregory Boyce said the decision was made because coal demand will continue to grow on a long-term basis.

“We are the largest producer and reserve holder in the Illinois Basin, which is one of the fastest-growing coal regions,” he said.

“Peabody’s history as a reliable supplier of affordable fuel, combined with our leading production and reserve position and financial strength, provided us the opportunity to secure some of the largest coal supply agreements in Peabody’s history and develop this world-class operation to serve growing customer needs.”

The producer noted it would spend $350-400 million on the 350-worker Bear Run complex over the coming years to bring the upcoming operation to full production capacity.

Peabody announced late last week that reserve exhaustion and geological conditions both led to its decision to close the Vermilion Grove underground operation in Illinois.

Each of the 160 workers from the closed mine will be offered transfers to other company operations in the region, but the company did not indicate on Tuesday if Bear Run will be one of those options.

Peabody corporate communications manager Meg Gallagher told International Longwall News on Monday that Vermilion Grove produced close to 1Mt in 2008 and the producer does not expect a production shortfall as a result.

“The mine has had a good run, and we’re pleased to offer placement opportunities elsewhere, especially during such tough economic conditions,” she said, adding that the mine’s equipment will be moved to other operations.