L & L Energy Inc., a U.S.-based coal company with mining and distribution businesses in China, today announced its acquisition of a majority controlling interest of the DaPing coal mine, effective March 15, 2011.
The DaPing mine is located in PanXian, Guizhou Province in China. L & L is partnering with the current owner to form a U.S. joint venture in China, in which L & L will contribute approximately USD $18 million in exchange for management control and 60 percent equity of the new joint venture. L & L will inject an additional $3 million in capital expenditures to improve safety and operational efficiency of the mine; the current owner of the mine will contribute mining rights and all mine-related assets to the joint venture.
Dickson Lee, chairman and CEO of L&L, said the acquisition meets L & L’s longer business goals, and noted DaPing’s profitable performance, which Lee expects will be a solid contributor to the company.
“This agreement represents an important step forward in our long-term growth strategy. By acquiring a majority stake in the DaPing mine, we will be better positioned to meet the rising coal demand in China and more specifically Guizhou Province, which is undergoing rapid industrialization due to the Chinese government’s economic development initiatives. The current owner of DaPing has a profitable operating history and close relationships with distributors in the region. We expect to expand upon its already profitable operation, which is expected to significantly contribute revenue and net income to L&L’s operations,” Lee stated in the press release.
DaPing currently produces approximately 150,000 tons of high-quality, low-sulfur metallurgical coal per year and the company said it is expanding to 300,000 tons of production capacity, which is expected to be completed in 2012.
Based on current production and average coal price of $240 per ton, the DaPing mine is expected to generate approximately $36 million in annual revenue, as well as an estimated $11 million in net income attributable to L&L for the fiscal year ending April 30, 2012.
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