Vectren ( VVC), an energy holding company, said its wholly owned coal mining operations subsidiary, Vectren Fuels, has begun the process of opening two new underground mines near Vincennes, Ind.

The Evansville, Ind.-based company expects the first mine to be fully operational by early 2009, with the second mine to open the following year.

The southwestern Indiana mines will provide an estimated 425 local jobs to contract miners.

The company projects combined production of five million tons annually from reserves located within 50 miles of eight coal-fired power plants.

Majority of the production will be used at Vectren's A.B. Brown and F.B. Culley power plants in Posey and Warrick counties.

The company said that this development will help replace the company's Cypress Creek surface mine in Boonville, Ind., whose reserves will be depleted within the next two to three years.

The mineral rights for the reserves, which are estimated at 80 million tons of recoverable number-five coal at 11,200 British thermal units (BTU) and 6-pound sulfur dioxide, were purchased from Templeton Coal Company.

The $125 million investment should begin production in the coming years as Fuels works to obtain permits and construct surface and underground facilities, company said.

The two new mines, combined with Fuels' existing underground mine, Prosperity, near Petersburg, Ind., will yield about eight million tons of coal a year on coming into production.

This story was created through a joint venture between TheStreet.com and IRIS.

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