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Arch Coal acquired South Hilight coal lease in the southern PRB

World Coal,

Arch Coal has acquired a federal coal lease known as the South Hilight tract in the southern Powder River Basin (PRB). Arch bid US$ 1.35/t for the 1977 acre tract, which contains an estimated 222 million t of minable coal reserves in Campbell County, Wyoming.

South Hilight is contiguous to Arch's Black Thunder mine and contains some of the highest quality coal in the southern PRB, with an average heat content of more than 9000 Btus/lb and an ultra-low sulfur dioxide content of less than 0.55 lb/million Btus, according to Arch analysis.

"Because of their very high quality, the South Hilight reserves are exceptionally well positioned to serve both the growing export market and expanding domestic demand for ultra-low-sulfur coals," said Steven F. Leer, Arch's chairman and CEO. "Black Thunder is already producing the highest-Btu coal in the southern PRB, and the addition of the South Hilight reserves should extend that quality advantage still further over time."

Shipped tons from Black Thunder have averaged close to 8900 Btus/lb year-to-date in 2011, compared to an average of less than 8600 for all other mines in the southern PRB, according to Energy Information Administration data. In 2010, Black Thunder produced 116.2 million t of coal from an assigned reserve base that totalled 1.4 billion t at the end of December 2010.

The US$ 300 million bid amount will be paid in five installments of US$ 60 million each, with the first installment paid immediately. Arch will begin pursuing the necessary permits for South Hilight right away, with the goal of integrating the new lease into the existing mine plan at Black Thunder. The company has no current plans to expand production at the Black Thunder operation.

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