Peabody Signs Long-Term Supply Deals

Peabody Energy (BTU Quote) announced Tuesday that it has entered a supply agreement with two power suppliers for more than 90 million tons of coal.

St. Louis-based Peabody signed long-term deals of up to 17 years in length with two Midwestern power generators, the company said. The contracts are expected to produce $6 billion in revenue.

The contracts will allow Peabody to begin developing the Bear Run Mine in Sullivan County, Ind. The mine will ultimately be the largest surface coal mine in the eastern U.S., with an expected annual capacity of 8 million tons of coal.

The Bear Run Mine in Sullivan County, Indiana will ultimately supply 225,000 truckloads of coal.

Operations at Bear Run will begin in the second half of 2009. The mine will initially produce approximately 2 million tons of coal a year and will ramp up to full capacity after 2010. The mine will employ roughly 350 full-time workers.

"Long-term coal demand continues to grow," said Peabody Chairman and CEO Gregory H. Boyce. "We are the largest producer and reserve holder in the Illinois Basin, which is one of the fastest growing coal regions."

Peabody Energy is the world's largest private-sector coal company. The company produced 256 million tons of coal in 2008 and generated $6.6 billion in annual revenue. Peabody's coal is responsible for 10% of all U.S. electricity generation and 2% of all electricity generation worldwide, according to a company press release.

Shares of Peabody were recently advancing 4% to $26.17.

Elsewhere in the mining space, Arch Coal(ACI Quote) was down 0.4% at $13.66, Consol Energy(CNX Quote) was climbing 1.6% to $27.90, and Massey Energy(MEE Quote) was rising 1.2% at $10.43.