Arch Coal, Inc. announced Thursday that it has entered into an agreement to acquire the Guffy property from Patriot Coal Corporation for $16 million in cash. The Guffy reserves are owned in-fee, are contiguous to Arch's Tygart Valley reserves and the Leer mine, and are of comparable quality to Leer's high-volatile "A" metallurgical coal reserves. The addition of the Guffy reserves will enable Arch to recover up to an incremental 8 million tons of metallurgical coal at the Leer mine, thereby extending the estimated mine life of Leer by nearly three years.
Arch also announced that it has resolved all pending and potential legal claims with Patriot stemming from Arch's sale of coal companies to Magnum Coal Company, a subsidiary of ArcLight Capital Partners LLC, in 2005 and the subsequent purchase of those companies by Patriot in 2008. In consideration for this release, Arch will pay $5 million in cash to Patriot upon its exit from bankruptcy. Additionally, the settlement includes the release of a $16 million letter of credit posted by Patriot in Arch's favor for surety bonds related to the companies sold to Magnum. Under the terms of the agreement, Patriot is required to replace the bonds in their own name or repost an $8 million letter of credit in Arch's favor by December 31, 2015.
Following the settlement with Patriot, Arch remains in active discussions on a potential resolution with the United Mine Workers of America (UMWA) on outstanding litigation claims. The US District Court recently dismissed the ERISA claim the UMWA had filed against Arch.
