Under the agreement, Alliance initially invested $69.5 million in White Oak. In a May filing with the U.S. Securities and Exchange Commission, Alliance said it had funded $164.8 million to White Oak as of March 31. “We expect to fund a total of approximately $300.5 million to $425.5 million from the transaction date through the next approximately two years, which includes the funding made to White Oak at closing and through March 31, 2013,” Alliance said.

As part of their original deal, the two companies also entered into a coal handling and services arrangement under which Alliance is constructing a coal preparation plant and other surface facilities at the mine site in southern Illinois. Alliance said it expects to finance these additional commitments “utilizing cash balances, future cash flows from operations, borrowings under credit facilities and cash provided from the issuance of debt or equity.”

Alliance WOR Properties LLC, a subsidiary of Tulsa, Okla.-based Alliance, in September 2011 acquired from White Oak the rights to about 204.9 million tons of proven and probable high-sulfur steam coal reserves from the Herrin No. 6 coal seam in southern Illinois for $33.8 million in cash. Hamilton County is adjacent to White County, Ill., where Alliance’s Pattiki underground continuous miner operation is located.  

In 2012, WOR Properties provided $34.6 million to White Oak for development of the acquired coal reserves, fulfilling its initial commitment for further development funding, said Alliance.

During the first three months of 2013, WOR Properties acquired from White Oak for $12.1 million cash an additional 42.2 million tons of reserves, of which 21.9 million tons currently are being developed for future mining by White Oak. WOR Properties has a remaining commitment of $42.5 million for additional coal reserve purchases and development funding.

White Oak 1 began producing development coal earlier this year. The mine is targeted to produce 6 million to 6.5 million tons of coal annually once the longwall is in operation, probably by 2015. The coal is expected to be marketed in both domestic and export thermal coal markets.

Alliance, which also operates mines in Central Appalachia and Northern Appalachia, said it expects to produce about 39 million tons of steam coal this year, up from 34.8 million tons in 2012.