Abstract: A method of manufacturing a pelletized fuel including the steps of hydrolizing cellulose containing material to form a binder, mixing the binder with combustible fines including preferably coal fines and wood chips or saw dust in which the binder is about two percent to eight percent by weight of the mixture, and forming the mixture into pellets. The pellets are dried by subjecting them to a temperature sufficient to drive off substantially the water content thereof to provide pellets which are crush resistant and weather resistant and which may thereby by handled for use as a fuel such as in a boiler for generating steam.