TIDMATC
RNS Number : 8392U
Atlantic Coal PLC
03 January 2012
Atlantic Coal plc/Index: AIM/Epic: ATC/Sector: Mining
3 January 2012
Atlantic Coal plc ("Atlantic Coal" or the "Company")
Entry into an option to lease a 410 acre Pennsylvanian
anthracite mining property
and conditional coal purchase agreement
Atlantic Coal plc, the AIM listed open cast coal production and
processing company with activities in Pennsylvania, USA, is
delighted to announce that it has entered into a lease option
agreement (the "Lease Option") with Reading Anthracite Company
("RAC"), an established operator in Pennsylvania's anthracite coal
industry, over the fully permitted 410 acre Pott & Bannon
anthracite mining property in New Castle Township, Schuylkill
County, Pennsylvania (the "Property").
Highlights:
-- Lease option signed over a permitted 410 acre anthracite
mining property with Pennsylvania based Reading Anthracite
Company
-- Directors estimate site to contain Reserves of 12 million
tons Run of Mine at 3.9 ratio with 4.1 million tons of clean coal -
potential to more than double Atlantic Coal's existing anthracite
reserves
-- Atlantic Coal's average sales price during November 2011 of
anthracite in Pennsylvania was c.US$156/ton
-- Site located 25 miles from the Company's Stockton site in the
productive Pennsylvanian Anthracitic Belt with established
infrastructure and industrial and domestic demand
-- Following completion of due diligence, a consideration of c.
US$6.0 million in cash and shares to be paid to Reading Anthracite
Company plus the grant of US$3.0 million worth of warrants in
Atlantic at 0.75 pence per share - cash component to be satisfied
from Atlantic Coal's from existing cash resources
-- Strong potential for building a commercial relationship with RAC, a US anthracite company
-- Agreement is part of the Company's strategy of increasing its
current reserves and production profile, particularly in the
Pennsylvania Anthracitic Belt
RAC has been operating in Pennsylvania for 135 years. The
Property, which is located 25 miles from Atlantic Coal's existing
producing opencast anthracite operation, the Stockton Colliery,
contains the high quality Mammoth Seam also being mined at Stockton
and has a geographic location in close proximity to major
east-coast transportation hubs. Entry into the Lease Option is part
of Atlantic Coal's expansion strategy of increasing its current
reserves and production profile, particularly in the Pennsylvania
Anthracitic Belt. In addition to the Lease Option, Atlantic Coal
has granted a conditional coal purchase agreement to RAC, of which
further details are set out below.
Based on information provided to the Company in a report,
commissioned by RAC in January 1999, prepared by John T. Boyd &
Company, the Directors believe that the Property could contain up
to 13.6 million tons ("Mt") run-of-mine ("ROM") coal, equating to
approximately 4.1Mt of washed, saleable anthracite. The average
strip ratio is estimated to be 3.9 ROM. Confirming these resource
details will form part of Atlantic Coal's due diligence on the
Property and will be updated by a qualified person (as defined
within the AIM Rules for Companies). However, there can be no
guarantee that the qualified person's report will confirm these
numbers and further announcements will be made in this regard at
the appropriate time.
Atlantic Coal's Managing Director, Steve Best, said: "We are
extremely pleased to have been able to secure an option on this
major site. This agreement is in line with our growth strategy of
expanding our regional footprint in this prime anthracite region,
which has excellent infrastructure and established demand, and
building Atlantic Coal into a major anthracite producer in the USA.
I believe that should Atlantic Coal decide to exercise the option,
this deal will be beneficial to both parties, and in particular
provide us with a more diverse portfolio. Additionally, this
transaction could enable us to build a strong relationship with
RAC, and the potential for examining additional business
opportunities with this US company, which has been operating for
over 135 years and is already a national and global supplier for
metallurgical and diverse manufacturing industries, commercial and
municipal filtration applications, and residential and commercial
heating. The signs from our initial evaluation have been positive
and we look forward to updating shareholders as our more detailed
due diligence progresses."
Lease option
In order to secure the Lease Option, Atlantic Coal has made a
payment of US$250,000.00 to RAC. This sum is refundable only if the
board of RAC do not approve the granting lease to Atlantic Coal
pursuant to the Lease Option. In addition, Atlantic Coal has made a
further payment of US$250,000.00 to be held in escrow for a six
month period (the "Escrow Payment") to enable Atlantic Coal to
carry out due diligence on the Property. The Escrow Payment is
repayable to Atlantic Coal in the event that Atlantic Coal does not
wish to exercise the Lease Option.
Subject to the results of the due diligence, obtaining all
necessary regulatory and shareholders consents and the satisfaction
of various other conditions precedent including the transfer of the
relevant permits, Atlantic Coal has the option to take a lease of
the Property (the "Lease") for an initial period of ten years (the
"Initial Period"). Following the expiry of the Initial Period,
Atlantic Coal will have the option to extend the Lease for two
additional five year periods. In consideration for RAC granting the
Lease to Atlantic Coal, Atlantic Coal will pay RAC the sum of
US$2,750,000.00 in cash (from the Company's existing cash
resources) and US$3,000,000.00 to be satisfied by the allotment of
a corresponding number of ordinary shares (to be determined by
Atlantic Coal's VWAP for the preceding three months) in Atlantic
Coal to RAC (or, in certain circumstances, to RAC's shareholders)
(the "Consideration Shares"). RAC will also be issued with warrants
to subscribe for up to US$3,000,000 worth of ordinary shares in
Atlantic Coal at a price of 0.75 pence per ordinary share for five
years from the grant of the Lease (the "Warrants"). Should the
board of Atlantic Coal decide to exercise the Lease Option a
circular will be sent to shareholders at the appropriate time so as
to enable the Consideration Shares and the Warrants to be issued to
RAC.
Under the terms of the Lease Option, should Atlantic Coal choose
to exercise the Lease Option then Atlantic Coal has agreed use its
best endeavours to employ mining equipment at the Property to
achieve a minimum production of 400,000 tons of ROM coal in the
second year of the Lease, provided that market conditions warrant
such a level of production.
Coal purchase agreement
Under the terms of the Lease, RAC will have the annual option to
purchase (at certain pre-agreed prices) up to 50 per cent. of all
sizes of standard coal provided that the standard coal meets
certain specifications. Further, until Atlantic Coal constructs a
processing plant at the Property, RAC will have the right to
purchase all of the raw coal mined by Atlantic Coal at the Property
at certain pre-agreed prices. Should Atlantic Coal determine that
it will not construct a processing place at the Property then RAC's
right to purchase all of the raw coal mined by Atlantic Coal at the
Property will reduce to 50 per cent. of all of the raw coal mined
by Atlantic Coal at the Property. Finally, RAC will be granted the
right of first refusal in respect of the purchase all coal which
does not meet the specifications set out in the Lease Option.
Ronald L Lewis, of John T. Boyd & Company, who meets the
criteria of a qualified person under the AIM Rules - Guidance for
Mining, Oil and Gas Companies, has reviewed and approved the
estimated resource information contained within this
announcement.
**ENDS**
For further information on the Company, visit:
www.atlanticcoal.com or contact:
Steve Best Atlantic Coal plc Tel: 020 3328 5670
Nick Naylor Allenby Capital Limited Tel: 020 3328 5656
Alex Price Allenby Capital Limited Tel: 020 3328 5656
Peter Rose Fox-Davies Capital Limited Tel: 020 3463 5030
Simon Leathers Fox-Davies Capital Limited Tel: 020 3463 5010
Hugo de Salis St Brides Media & Finance Tel: 020 7236 1177
Limited
Elisabeth Cowell St Brides Media & Finance Tel: 020 7236 1177
Limited
Richard E. Cooper Cooper Global Communications Tel: +1 (212) 317
1400
Jennifer K. Cooper Global Communications Tel: +1 (212) 317
Zimmons 1400
This information is provided by RNS
The company news service from the London Stock Exchange
END
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