🕐21.01.10 - 09:53 Uhr
Atlantic Coal plc - ATC - Termination and Settlement of Supply Agreement
Atlantic Coal plc / Index: AIM / Epic: ATC / Sector: Mining
21 January 2010
Atlantic Coal plc (Atlantic or the Company)
Termination and Settlement of Supply Agreement
Atlantic, the AIM listed open cast coal production and processing
company with activities in Pennsylvania, USA, has reached a settlement
terminating its Supply Agreement with Pagnotti Enterprises, Inc.
(Pagnotti).
Based on the current sales price of clean washed
anthracite, the Board estimates this will save the Company in excess of
US$10 million during the life of its Stockton Mine.
In connection with the acquisition of the Stockton Mine real estate in
November 2000, the Stockton Coal Group (SCG), a subsidiary of
Atlantic, entered into a Run of Mine (ROM) Coal Sale and Purchase
Agreement to supply coal to Jeddo, an affiliate of the vendor, Pagnotti.
Under the terms of the agreement, Jeddo was granted the option to
purchase up to 100,000 tons of coal annually, whilst the term of SCGs
obligation lasted until all the coal reserves at the Stockton Mine were
depleted.
As the pricing of the coal supplied under this agreement was
not fixed by the market, but by an escalator based on movement in the
producer price index, the price of any coal supplied to Jeddo would have
been substantially below market price.
As part of the agreement, SCG was required to deposit into an escrow
account US$1.00 for every ton of prepared coal produced from the site.
The current balance of this escrow account is US$435,000.
As a result
of non-supply under the agreement, a provision has been recognised for
SCGs obligations.
As at 30 June 2009 this provision stood at
US$2,592,000.
The terms of the settlement agreement are as follows:
* The US$435,000 currently held in escrow will be paid to
Pagnotti
* A cash payment of US$565,000 will be paid to Pagnotti
* A US$700,000 promissory note payable in three instalments in
March 2011, March 2012 and March 2013
* A US$1.50 royalty payable on all clean coal sold, payable 60
days after sale continuing over the life of the mine
The termination will result in a write-back of the provision for the
year ended 31 December 2009 of circa US$800,000.
Atlantic Managing Director Steve Best said, "The termination of the
Pagnotti Supply Agreement is a major step forward in improving the long
term profitability of the Stockton Mine and should save us approximately
US$10 million during the life of the mine.
The additional tonnage
released as a result of this agreement will also provide substantial
opportunities for sales not only to our existing customers but also for
securing new customers.
We are now focussed on utilising this cash flow
to expand our asset base and production and in line with this we
recently announced our intention to acquire Montana based Maple
Carpenter Creek, LLC, which has over 380 million tons of coal resource."
**ENDS**
For further information on the Company, visit: www.atlanticcoal.com
or contact:
Greg Kuenzel
Atlantic Coal plc
Tel: 020 3328 5670
Steve Best
Atlantic Coal plc
Tel: 020 3328 5670
Nick Naylor
Allenby Capital Limited
Tel: 020 3328 5656
Jamie Boyd
Allenby Capital Limited
Tel: 020 3328 5656
Daniel Fox Davies
Fox Davies Capital Ltd
Tel: 020 7936 5230
Hugo de Salis
St Brides Media & Finance Ltd
Tel: 020 7236 1177
Paul Youens
St Brides Media & Finance Ltd
Tel: 020 7236 1177
Paul Youens
St Brides Media & Finance Ltd
Chaucer House
38 Bow Lane
London EC4M 9AY
T: +44 (0) 207 236 1177 | M: +44 (0) 7989 384 551 | F: +44 (0) 207 236
1188 | www.sbmf.co.uk
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