White Energy Company Ltd. and Peabody Energy announced a joint venture to build a coal upgrading plant in Montana. The Peabody and White Energy coal upgrading facility will be built at an unnamed Peabody site in Montana.

Under the terms of the agreement, Peabody will have the right to purchase 15% of White Energy and has the first right to participate in future White Energy coal upgrading projects.

White Energy has a proprietary process for creating coal briquettes from high moisture lignite coal. The process increases the Btu value by 35%. The press release doesn’t describe the upgrading process, but it’s likely that the moisture content is reduced through a heating process and the lignite is formed into briquettes. An increased Btu value increases the value of the coal. The resulting coal briquettes are higher quality, more efficient and cleaner and can be interchanged with higher rank thermal coal in many applications.

Peabody and White Energy have begun engineering design and permitting activities for the first plant. The first plant is expected to take 24 months to construct. The plant is expected to produce more than 1 million tons of upgraded coal per year initially and the plant capacity will eventually be added to more than 20 million tons annually.