Atlantic Coal secures strategic offtake deal for up to half of Stockton mine's production

Atlantic Coal (AIM: ATC) has signed a strategic agreement with a private US coal marketing company, Xcoal Energy & Resources, to supply premium anthracite from Atlantic's Stockton mine in Pennsylvania. In a memorandum of understanding, Xcoal has agreed to purchase up to the greater of 150,000 tons per year and 50% of Stockton's annual anthracite coal production.

"This agreement with Xcoal, which has significant strategic supply agreements particularly with major integrated steel makers in both the Atlantic and Pacific regions, marks a positive step forward for Atlantic and is recognition of the quality of our anthracite production at Stockton”, Atlantic Coal MD Steve Best commented.

“With Xcoal indicating that it will look to take up to half of our targeted annual run-of-mine production of coal, the positive impact on sales and the resulting cash flow is clearly evident.”

Xcoal specialises in exporting US metallurgical coal to steel makers in Japan, China, Korea and Europe. Before signing the deal, the company took an initial tranche of 5,000 tons of premium anthracite.  Atlantic Coal said that Xcoal is a highly active, and expanding, coal marketing company.

Additionally, the parties mutually agreed to evaluate potential opportunities for Xcoal to participate in the funding for the expansion of both the Stockton mine and the other additional mining opportunities which would further solidify the relationship between the companies.

“Xcoal's participation in the future of Stockton fits well with our long term development plans, particularly given its international reach and we believe that the relationship will be highly beneficial for the future", Best added.

In January this year, Atlantic Coal agreed the termination of a legacy supply agreement with Pagnotti Enterprises. Previously under the terms of the Pagnotti supply deal, Atlantic was obligated to sell 100,000 tons of coal annually, at a price linked to changes in the producer price index which consequently priced the produced coal below market levels.

In January, the board estimated that the termination will save the company in excess of US$10 million during the life of its Stockton mine. Historically, the Pagnotti deal was struck in connection with Atlantic’s acquisition of the Stockton mine real estate in November 2000.

http://www.proactiveinvestors.com.au/companies/news/6416/atlantic-coal-secures-strategic-offtake-deal-for-up-to-half-of-stockton-mines-production-6416.html