The high-Btu underground coal reserves in Union and Webster counties in Kentucky will be developed for the planned 4 million tonne per annum Dyson Creek Mine. The company said development timing would depend on market conditions.
Included in the deal is the Caseyville Dock on the Ohio River, in addition to rail loading and other mining facilities.
While the price of the reserves was not made public Alcoa will receive a percentage of the mine's production.
"This acquisition represents one of the best remaining blocks of ultra-high Btu Illinois Basin coal with access to barge and rail transportation," said Gregory H Boyce, Peabody's president and chief executive officer elect.
"We're seeing strong demand for Illinois Basin coal thanks to investments in clean coal technologies."
Peabody also said it was installing a third dragline at the North Antelope Rochelle Mine that would increase the productivity of the major mining complex.
The new $US55 million dragline will be upgraded with a stronger boom, larger bucket and more hoisting power, giving it a 20% increase in operating capacity.
Dragline assembly will begin in the 2006 fourth quarter, and the dragline will be operational in the first quarter of 2007. North Antelope Rochelle shipped more than 82Mt of coal in 2004.
