US-based Arch Coal is set to suspend its work for obtaining a mining permit for the Otter Creek coal reserves near Ashland, southeastern Montana, due to capital constraints.
The company also blamed a weak coal market and uncertainty in the permitting process for its suspension decision.
In 2010, Arch Coal secured lease rights to about 8,300 acres of state-owned minerals in the Otter Creek area and has since engaged state regulators through the permitting process to obtain the approval to mine.
The process was prolonged and a further fall in coal markets prompted the company to suspend the permitting effort.
Arch Coal said in a statement: "The Powder River Basin remains an important coal supply region for domestic and international power generators. However, given current conditions, Arch can no longer devote the time, capital and resources required to develop a coal mine on the Otter Creek reserve block.
"Arch remains committed to navigating a challenging market environment, executing upon its prudent capital allocation strategy and preserving liquidity. This step will allow Arch to further intensify its focus on operating safe, responsible and low-cost mines."
The news follows Arch Coal filing of voluntary petitions for reorganisation in the US Bankruptcy Court for the Eastern District of Missouri in January 2016.
The company also reached an agreement with a majority of its lenders under its $1.9bn first lien financing facility to restructure its debt.