The Tennessee-based company said this week that it believed the 14,300-acre property had a significant reserve of high-quality, mid-volatility metallurgical coal. It did not name the seller, but confirmed the price tag of $US5.2 million.
The property is about 120 miles southeast of Xinergy’s existing Raven Crest operation.
While production is expected in the fourth quarter, the company said it should show fruit rapidly.
"We expect it will be accretive to earnings beginning Q1 2012,” Xinergy chairman and chief executive Jon Nix said.
“Our estimated capital expenditures for this project will include construction of a batch weigh unit train loadout facility, purchasing surface and support equipment spreads, as well as rehabilitating approximately seven miles of CSX rail line."
Referencing a December 2008 report on the property completed by the previous owner and Doss Engineering, Xinergy believes the southern West Virginia property contains about 30 million tons of mineral resources in the Little Raleigh, Beckley and Fire Creek coal beds, which are known locally as Sewell seams.
The mineral resource is made up of 11.95Mt measured, 6.85mt indicated and 11.2Mt inferred. Total proven and probable mineral reserves are estimated to be 8.8Mt, of which 5.75Mt are proven and 3.05Mt probable mineral reserves.
Xinergy has commenced an exploration program and started the process to produce a National Instrument 43-101 compliant reserve estimate.
It also intends to immediately submit the necessary permit application for production from the Blue Knob block, and expects those permits late in the third quarter.
When initial production begins early in the fourth quarter, it will be at a rate of 10,000-20,000 tons monthly, ramping up to 600,000 tonnes per annum. Production expansions will commence as sales and the market permit, the company said.
"We are pleased to close this transaction at a time when supply for metallurgical coal is tight while global demand continues to surge,” Xinergy president Bernie Mason said.
“This is a tremendous acquisition to add to our portfolio of assets.”
