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Atlantic Coal (:LSE:ATC), an AIM listed anthracite coal mining company operating in Pennsylvania, USA, has announced that it has entered into a joint venture and coal sale agreement with China based CIC Brancepeth Coal Limited (“CIC-Coal”), a company founded and currently managed by AIM listed CIC Capital Ltd.
Joint venture agreement:
Under the joint venture agreement Atlantic Coal will provide coal mining and processing expertise to CIC-Coal and, in return, CIC-Coal will purchase coal mined and/or processed by Atlantic Coal.
The joint venture agreement runs for an initial three year period following which it may be extended by mutual agreement.
Coal sale agreement:
Under the coal sale agreement Atlantic Coal will sell a minimum of 100,000 tonnes per year to CIC-Coal (with a minimum of 20,000 tonnes per quarter). The coal sale agreement provides a price per tonne which is adjustable subject to market conditions. In addition, there are certain specification provisions in relation to the coal to be sold pursuant to the coal sale agreement.
Under the terms of the coal sale agreement Atlantic Coal is responsible for all shipment costs up to the point of delivery to CIC-Coal in Tianjin, China (including all duties, tariffs, taxes and other charges that may be levied).
The coal sale agreement will commence no later than 31 March 2014 and will last for an initial period of three years following which the agreement provides a mechanism for its extension.
Atlantic Coal’s Managing Director, Steve Best, said: “I am delighted to establish this relationship between Atlantic Coal and CIC-Coal with these joint venture and coal sales agreements. CIC-Coal and CIC Capital bring over 22 years of experience in the Chinese coal market which will not only facilitate the marketing of our premium anthracite to what is the world’s largest user of anthracite but also provide the essential local contacts to ensure effective transport and distribution to end users primarily in the iron and steel industry. Our expansion plans in Pennsylvania are, in part, dependent on developing export markets and we see China as being one of the main targets with anthracite imports already having risen over 11% in the first five months of this year. To this end CIC-Coal and its subsidiary, Chinese coal group King Harmony Limited, will purchase Atlantic Coal’s anthracite in the form of the off-take agreement. This in addition to the optimism we shared on 4 November 2013 when we reported that market price levels were now improving and we had commenced two full shifts working at both the mine and the washing plant in anticipation of higher demand as we go into the winter and so gives us further confidence to continue the development of our assets.
While we currently have no immediate plans to enter the Chinese coal mining industry, the joint venture with CIC-Coal, with its interests in Chinese coal operations, also brings new opportunities to utilise our coal mining and processing expertise to develop new coal mining projects in China in the future.”
