Patriot Coal has filed a letter of intent with the Bankruptcy Court for a proposed sale of a majority portion of its operating assets to Blackhawk Mining in the US.
The company also filed a motion outlining the bidding procedures for the proposed sale of its assets.
Under the terms, Blackhawk would issue $643m new debt securities and class B units to Patriot's secured lenders, which entitles them to own a stake in Blackhawk.
The company will also assume or replace surety bonds supporting reclamation and related liabilities that are associated with the purchased assets.
To be completed as per the chapter 11 plan, the transaction is subject to documentation of an asset purchase agreement.
In addition to other customary conditions, the transaction is subject to bankruptcy court approval of the sale and confirmation of a chapter 11 plan.
At the time of the sale process, Patriot's mining operations and customer shipments will continue as usual.
Patriot Coal president and chief executive officer Bob Bennett said: "We feel strongly that the proposed transaction with Blackhawk is in the best interest of Patriot, and its employees and stakeholders.
"Blackhawk shares our dedication to operational and environmental excellence, and this transaction creates a viable path forward in this challenging market environment, enabling our mining operations to continue serving customers and preserving jobs in the communities in which they operate."
With regard to the terms of a formal purchase agreement, Patriot is continuing talks with Blackhawk.
According to Patriot, some of its assets are not included in the planned deal, and they will be sold separately.
Excluded mines from the deal include Patriot's Federal No 2 mine located in northern West Virginia, as well as some other mining assets in south west Virginia, including Hobet 21 complex.