Arch Coal Inc and Great Northern Properties Limited Partnership announced that they have signed a coal lease comprising all of GNP’s coal resources in the Otter Creek Tracts located in south eastern Montana.

The coal lease will give Arch the right to mine approximately 9,600 acres of GNP owned minerals that encompass approximately 731 million tonnes of high quality, low cost sub bituminous coal reserves. As consideration for entering into the lease, GNP will receive a front end bonus of USD 0.10 per tonne or USD 73.1 million, which will be payable in equal annual instalments over a 5 year period.

Mr Steven F Leer chairman & CEO of Arch Coal said that "The lease of GNP’s Otter Creek reserves provides an attractive future growth opportunity for Arch to build a significant position in the Northern Powder River Basin coal region. We believe future development of these Montana coal reserves will help competitively serve the northern US power generation market, provide Arch with an additional supply source to export into the fast growing Pacific Rim coal market or possibly house the site of a future coal conversion facility. Investing in these low ratio reserves now will give us a future cost advantage in the domestic and international energy markets."

Mr Corbin J Robertson Jr chairman & CEO of GNP said that "We are pleased to have Arch, a world class coal company, develop some of GNP’s most significant reserves."

The 731 million tonnes of low ratio, sub bituminous coal reserves, which are low in sulphur dioxide content, are located in the Ashland coalfield southeast of Billings, Mont. These reserves would support the future development of a large scale, dragline operated surface coal mine.