Bowie Resource Partners (BRP) will own the Bowie and Canyon Fuel mines and will be based in Louisville, Ky., with a regional office in Grand Junction, Colo. It will have an annual productive capacity of 15 million to 17 million tons of thermal coal and a workforce of 1,100. Trafigura AG will be the exclusive marketing agent for all of BRP’s production.

“From the beginning with Bowie, our goal has been to establish a core business rooted in the Western Bituminous Region and to grow organically as well as with specifically targeted synergistic acquisitions. We see this as an opportune time to position ourselves, with very selective mining and transportation assets, to be out in front of an anticipated renewed global interest in Western U.S. coal,” said John J. Siegel, chairman, BRP. “The exemplary safety and productivity record of Canyon Fuel, the company’s long-term relationships with its cornerstone domestic customers, and the superior quality and geology of its reserves, in conjunction with our recent development of significant West Coast export throughput capacity, combine to make this an extraordinary acquisition for us.”

The Galena Private Equity Resource Fund was created in 2012 to invest in equity and debt of small- to medium-sized metals and mining companies in a development or expansion phase. The fund will make a cash equity investment of $104 million in BRP to acquire a significant minority stake in the joint venture company.

“Galena has built an impressive record of prudently selecting high performing investments,” said Jeremy Weir, CEO of Galena Asset Management. “We believe that Bowie Resource Partners has a unique opportunity to reshape the Western U.S. coal paradigm.”

Canyon Fuel Co. includes the Sufco and Skyline longwall mines and the Dugout Canyon continuous miner operation, all located in Utah. Canyon Fuel is projected to generate EBITDA of about $90 million in 2013. In addition to these active operations and related support facilities, Arch will transfer to BRP approximately 105 million tons of bituminous coal reserves in Utah. BRP plans to expand that reserve base. The workforce at the Canyon Fuel operations will remain in place after the transaction and will become BRP employees.

Bowie operates a 5 million ton per year longwall mine, located in Paonia, Colo. It opened in 1998, and was purchased by a group headed by John Siegel and Steve M. Rickmeier in July 2009. More than half (60%) of Bowie’s production and remaining reserves are committed to the Tennessee Valley Authority under a long term favorably priced contract. Bowie has a state-of-the-art 650-tph heavy-media wash plant, a 115 car unit train loadout facility, and produces “super-compliance” bituminous coal.

The Bowie mine has 325 employees and, like Canyon Fuel, has consistently ranked in the top 10 most productive and safest longwall operations in the U.S. “The Bowie employees’ motto of ‘the best of the best’ dovetails perfectly with the work ethic and commitment to excellence that has long been the hallmark of the workforce at Canyon Fuel. We are proud to bring these two exceptional teams together, and we believe this merger of industry talent gives us the opportunity to create something very special,” Siegel said.

Bowie has a long term agreement with Metropolitan Stevedore Co. for the Port of Stockton, which will provide BRP with the opportunity to ship up to 2.3 million tons annually, as the Metro Ports/Stockton agreement will be assigned by Bowie to BRP. Separately, Bowie has been in negotiations with Levin Richmond Terminal Corp. for the Port of Richmond, which would provide BRP with annual “topping off” capacity of an additional 1.2 million tons. Bowie has also signed a Letter of Intent for significant export capacity via a Pacific port in the Northwestern U.S., which would also be assigned to BRP.

“We think the time is right to introduce the new ‘Bowie Brand’ into markets where the need and appetite for coal-fired power generation is growing, not abating. In that regard, we are excited to have the opportunity to take advantage of (our marketing partner) Trafigura’s global coal sales platform” Siegel said.

Bowie has obtained a committed financing arrangement, led by Morgan Stanley Senior Funding and Deutsche Bank AG New York Branch, to fund the transaction. The Galena Private Equity Resource Fund will provide equity financing for the transaction through an investment in BRP. Consummation of the transaction is subject to certain governmental and regulatory conditions and approvals and other customary conditions. Morgan Stanley & Co. LLC is acting as the financial adviser to Bowie and Bowie is represented by the law firms of Baker Botts LLP and Fultz Maddox Hovious & Dickens PLC.