Puda Coal Provides Updates on Coal Mine Consolidation Projects
(NYSE Amex: PUDA) (“Puda Coal” or the “Company”), a supplier of high grade
metallurgical coking coal used to produce coke for steel manufacturing in
provided additional updates on the status of Company’s coal mine consolidation
projects.
Background: Coal Mine Consolidation Program in
In order to improve production efficiency, workplace safety and reduce
coal mine accidents, in early 2009, the
“government”) adopted a policy requiring mergers and consolidations of smaller
coal mines in
Coal Group Co. Inc. (“Shanxi Coal”), a subsidiary that is 90% owned by the
Company, was appointed as a consolidator of eight thermal coal mines located
in Pinglu County in southern
the Pinglu Project, Shanxi Coal will acquire and consolidate eight thermal
coal mines into five mines with approximate reserves of 163.9 million metric
tons (“MT”), based on government records. Importantly, the government approved
an increase in post-consolidation annual production of the Pinglu Project to
3.6 million MT from a pre-consolidation annual production of 1.56 million MT.
In early 2010, Shanxi Coal received the government’s approval to consolidate
four metallurgical coal mines into one large metallurgical mining operation
representing total recoverable reserves of 23.7 million MT (the “Jianhe
Project”). The government has approved an increase in post-consolidation
annual production at the Jianhe Project from to 900,
pre-consolidation annual production of 720,000 million.
Coal Mine Consolidation Process
The coal mine consolidation process is administered by the government and
has four stages. Certain steps in those four stages can proceed in parallel,
but the overall process is as follows:
-- Stage I: Purchase of coal mine assets and mining rights - As the
appointed consolidator Shanxi Coal will acquire the mining assets and
mining rights of the target coal mines, and then place the acquired
assets and mining rights into newly established project companies, with
names pre-approved by the government. Shanxi Coal will be the
registered principal shareholder of each project company.
-- Stage II: Permit applications - Two permits are needed for the target
coal mines to resume operation and begin construction after being
acquired by Shanxi Coal: (i) a transitional production permit for the
transitional period, during which production of the mines can resume at
the pre-consolidation level while the coal mines undergo upgrade and
construction; and (ii) a coal mine upgrade construction permit. The
transitional production permit requires Shanxi Coal to form production
safety, technology and management teams to upgrade existing mining
technology and operating safety. The coal mine upgrade permit requires
Shanxi Coal to complete the coal mine geological reports and submit the
required documents to the government, including workplace safety
analysis reports, environmental assessments, and preliminary
construction design for the coal mine. The coal mine upgrade permit can
be granted following the government's review of the above mentioned
documents.
-- Stage III - Upgrade construction period - Shanxi Coal will engage in
construction upgrades as per the construction design approved by the
government.
-- Stage IV - Project inspection and business registration - Upon
completion of the upgrades, the government will inspect the
construction quality, environmental and safety practice at these coal
mines. Upon approval, the new project companies will be granted
certificates of business registration and production permits.
Coal Mine Consolidation Project Status
Pinglu Project Phase I
In
Da Wa Coal Industry Co., Ltd. and Pinglu County Guanyao Coal Industry Co.,
Ltd., (“Dawa Coal and Guanyao Coal”) located in Pinglu County, for an
aggregate purchase price of
begun necessary coal mine maintenance and construction in the permitted areas
while awaiting the remaining permits. Shanxi Coal has obtained necessary
approvals from both the county and municipal governments for the transitional
production permit and is waiting for final approval from the provincial
government, which it expects to obtain in the near future.
Once the transitional production permit is granted, the coal mines can
resume production under their current capacity of 450,
actual utilization will be subject to the physical condition of Dawa Coal and
Guanyao Coal. Meanwhile, Shanxi Coal has submitted the required documents to
the government for the coal mine upgrade permit. Shanxi Coal is awaiting
further comments or formal approval for the coal mine upgrade permit. Upon
receipt of the coal mine upgrade permit, Shanxi Coal will begin expanding
production capacity of the mines to 900,
Pinglu Project Phase II
The remaining six coal mines of the Pinglu Project will be consolidated
into three larger thermal coal mining operations. The production capacity of
the six mines is 1.2 million MT per year prior to consolidation and will be
expanded to 2.7 million metric tons following consolidation. Shanxi Coal is in
active discussions with each of the six coal mine owners and expects to
finalize definitive acquisition agreements in the near term.
On
to co-develop Phase Two of Pinglu Project with Mr.
Company, and Mr.
cooperation agreement, Shanxi Coal is responsible for 40% of the total
investment in the Phase Two of Pinglu Project, Mr. Zhao is responsible for 30%
and Mr. Gao is responsible for the remaining 30%. Shanxi Coal estimates the
total purchase price for the six Pinglu mines to be
additional funds required to construct the target coal mines. Shanxi Coal
will control and manage the Phase Two of Pinglu project.
Shanxi Coal has begun the necessary steps to apply for the transitional
production permit. It has assigned employees on site, formed the safety
management team and is actively verifying asset status and has begun drafting
the safety and operational policies. Concurrently, Shanxi Coal is preparing
the required documents to apply for the coal mine upgrade permit, including
the safety analysis reports, environmental assessments, preliminary
construction and expansion proposals and geological exploration and data
collection.
Jianhe Project
Shanxi Coal will consolidate four metallurgical coal mines in Huozhou
County into one large metallurgical mining operation. Production capacity of
the four mines will be increased from 720,
the Pinglu Project, Shanxi Coal has begun the necessary steps to apply for the
transitional production and coal mine upgrade permits. Shanxi Coal is
actively engaged in negotiations with the current mine owners and expects
acquisition agreements to be finalized this year. Although it is early in the
process, Shanxi Coal expects total investment required for the target mines
assets purchase to be between
Mr.
supportive of the
and improve production efficiency and output. Given a large number of
projects to be approved by the provincial government, it is taking longer than
anticipated to obtain the transitional production and coal mine upgrade
approvals. However, we believe that Puda Coal has strong execution
capabilities and we expect to complete all permitted work while waiting for
approvals from the government. We are pleased with our progress thus far and
believe that we will continue to make substantial progress following
approval.”
About Puda Coal, Inc.
Puda Coal, through its subsidiaries, supplies premium high grade
metallurgical coking coal used to produce coke for steel manufacturing in
coking coal capacity. The Company has recently moved upstream into coal mining,
as a consolidator and acquirer of coal mines in
Pinglu projects and the Jianhe projects. On
90% indirect subsidiary of the Company, was appointed by the
government as an acquirer and consolidator of eight thermal coal mines located
Pinglu County in southern
the eight coal mines into five, increasing their total annual capacity from
approximately 1.6 million to 3.6 million metric tons. Shanxi Coal received
another approval by the
additional coking coal mines into one coal mine in Huozhou County. After the
completion of the consolidation, the Jianhe project is expected to increase
the total annual capacity from 720,000 metric tons to 900,000 metric tons,
according to the
please visit http://www.pudacoalinc.com .
FORWARD-LOOKING STATEMENTS
The information contained herein includes forward-looking statements.
These statements relate to future events or to our future financial
performance, and involve known and unknown risks, uncertainties and other
factors that may cause our actual results, levels of activity, performance, or
achievements to be materially different from any future results, levels of
activity, performance or achievements expressed or implied by these
forward-looking statements. You should not place undue reliance on
forward-looking statements since they involve known and unknown risks,
uncertainties and other factors which are, in some cases, beyond our control
and which could, and likely will, materially affect actual results, levels of
activity, performance or achievements. Any forward-looking statement reflects
our current views with respect to future events and is subject to these and
other risks, uncertainties and assumptions relating to our operations, results
of operations, growth strategy and liquidity. For example, our ability to
acquire and consolidate the target coal mines are subject to, among other
things, the risks and uncertainties relating to the market and geological
condition, timely receipt of government permits, due diligence, negotiation
for definitive agreements, etc. which are beyond our control, as well as our
management’s ability and capacity to execute our coal mine acquisition
strategy and manage the coal mine operations. We assume no obligation to
publicly update or revise these forward-looking statements for any reason, or
to update the reasons actual results could differ materially from those
anticipated in these forward-looking statements, even if new information
becomes available in the future.
For more information, please contact:
Investor Relations Contact:
Crocker Coulson, President
CCG Investor Relations
Tel: +1-646-213-1915
Email: crocker.coulson@ccgir.com
Elaine Ketchmere, VP of Financial Writing
Tel: +1-310-954-1345
Email: elaine.ketchmere@ccgir.com
Web: http://www.ccgirasia.com
Company Contact:
Laby Wu, Chief Financial Officer, Director of Investor Relations
Puda Coal, Inc.
Tel: +86-10-6439-2405
Email: labywu@gmail.com
Web: http://www.pudacoalinc.com
SOURCE Puda Coal, Inc.