L&L Energy, a U.S. coal operator serving China's coal market, has announced that through its subsidiary Baoxing Economic and Trade Co., Ltd it has subcontracted the operation of the Ping Yi Coal Mine located in Pingguan Town in Guizhou Province of China.
Under a fixed fee of approx. US$ 876,000 (or RMB 6M) per year, payable either in cash or in L&L common shares, Baoxing is allowed to operate the Ping Yi coal mine facilities of 150,000 tpa production.
The agreement allows Baoxing to operate Ping Yi, to provide the necessary working capital, and to collect the respective revenue, net profits and/or losses of Ping Yi.
Under the agreement, Baoxing is the exclusive provider of advisory and consultancy services to Ping Yi related to the Company's general business operations. Ping Yi's revenue, profit, or loss will be consolidated in L&L financial statements as a variable interest entity.
L&L expects the agreement to generate approximate $15M revenue per year, using $100/t coal price as a basis.
Ping Yi, a profitable coal mine with annual 150,000t of coal production and 31 mt of proven coal reserves, has been in operation since 2007. It is expanding its existing coal production capacity to 300,000 tpa.
The agreement covers a period of two years starting from 1 November 2009 and can be extended by mutual consent.
"This new development will extend more opportunities to us in the region," said Dickson Lee, president and CEO of L&L.
