Arch Coal Announces Plans to Acquire Jacobs Ranch


The Jacobs Ranch mine, located in Wyoming’s Powder River Basin, produces more than 40 million tons per year.
(Photo courtesy of Rio Tinto Energy America)
Arch Coal has agreed to purchase Rio Tinto’s Jacobs Ranch mine in the Powder River Basin of Wyoming for $761 million. In 2008, Jacobs Ranch produced 42.1 million tons of high-quality sub-bituminous coal. The transaction includes 381 million tons of low-cost coal reserves that are contiguous to Arch’s Black Thunder mine, as well as a high-speed rail loadout; a recently added overland conveyor and near-pit crushing system; strong customer commitments; and an expansive fleet of highly efficient mining equipment. “Once completed, we believe this transaction will create significant value for Arch Coal, its customers, and its shareholders,” said Steven F. Leer, chairman and CEO, Arch Coal. “Jacobs Ranch represents an excellent strategic fit with Arch’s existing assets in the Powder River Basin. The integration of Jacobs Ranch into the Black Thunder mine will create one of the world’s largest and most efficient mining complexes. Because Jacobs Ranch and Black Thunder share approximately six miles of property line, the combination is expected to create significant operating synergies.”

Arch anticipates operating synergies from the transaction related to the optimization of the combined equipment fleet; increased utilization of an expanded coal handling system and a state-of-the-art loadout; greater flexibility in product blending and quality control; more efficient inventory management; reduced net capital expenditures; and purchasing efficiencies. Upon integration, the combined Black Thunder complex will have three loadouts (capable of loading four trains simultaneously) and 22 train landing spots—the most of any mine in the Powder River Basin—which should collectively enhance availability and efficiency for the mine and customers.

Nearly 100% of Jacobs Ranch’s projected production for 2009 is committed and priced under existing sales contracts. Additionally, more than 75% of the mine’s projected 2010 production—and early 50% of its 2011 production—is committed and priced. Jacobs Ranch is served by the joint rail line. The equipment fleet at Jacobs Ranch includes a 120-cu-yd dragline, eight large electric shovels, and more than 40 haul trucks, all of which complement the existing equipment at Black Thunder. Arch’s reserves in the Powder River Basin would increase to 2.1 billion tons. Jacobs Ranch’s existing reserve base has an average heat content of more than 8,800 Btu/lb.

The boards of Arch Coal and Rio Tinto have approved the transaction.

As featured in Womp 2009 Vol 04 - www.womp-int.com