Atrum Forms Sales Joint Venture With Atlantic Carbon Group
Sydney, Nov 4, 2016 AEST (ABN Newswire) - Atrum Coal NL ("Atrum" or "The Company") (
ASX:ATU) (ATRCF:OTCMKTS) advises that it has agreed to form an unincorporated Joint Venture (the "Sales Joint Venture") with Atlantic Carbon Group PLC (SR0:FRA)("ACG") to market and sell anthracite from ACG operations. ACG is a high grade and ultra-high grade anthracite producer with operations in north eastern Pennsylvania, USA. It operates mines and processing plants near the town of Hazleton, Pennsylvania.
The Sales Joint Venture will be staffed by Atrum personnel and initially sell the 100,000t previously optioned by Atrum from ACG and which has generated significant interest in the market. Atrum has achieved a renegotiated outcome with ACG to increase the supply volume to 250,000t, for the initial period to 31 December 2017 and the Company is confident in its ability to achieve those sales.
ACG will provide the 250,000t at cost price plus an administration fee agreed by both parties. Profits from the sales from the Sales Joint Venture will be spilt 60% to Atrum and 40% to ACG. If Atrum achieves sales of 200,000t by 31 December 2017, ACG will extend the Sales Joint Venture by another four years, with a 10% increase in tonnage each year offered by ACG to the Sales Joint Venture.
Bob Bell, Executive Chairman, commented: "We have developed a close working relationship with Atlantic management during the past few months and we see this Sales Joint Venture as an extension of that relationship. The new Sales Joint Venture with ACG will focus on export markets. We have been looking at various options with Atlantic that would allow us to capitalise on the shortage of seaborne anthracite supply. This Sales Joint Venture allows Atrum to utilise its export market expertise in a cash-generating joint venture, in a rising market, without investing up-front capital on an acquisition. Anthracite prices in Asian markets are trending strongly upwards as all metallurgical coals are in short supply, and we expect anthracite prices in Europe to move strongly upward in the next quarter, right as we begin to export ACG products."
ACG and Atrum can agree an increase in tonnage over that stated above. The Sales Joint Venture has been designed to allow both companies to work more closely together and review other potential joint ventures with mines in the local area. There are several smaller operations in Pennsylvania that do not have the expertise and access to international markets, and the Company believes there is potential to source product from multiple smaller scale operations in the area.
As previously reported, the tight timeframes required by the UK Takeover Code and the difficulty in conducting due diligence on various US subsidiaries has resulted in a decision by Atrum not to pursue the purchase of ACG shares and warrants either at a minority or controlling level. This Sales Joint Venture arrangement offers the potential of sustainable profits from Pennsylvania anthracite sales whilst we develop Groundhog in north western British Columbia, which remains the largest undeveloped ultra-high grade anthracite deposit globally. With the recent rise in anthracite prices, we have experienced a steady stream of enquiries for anthracite in both Atlantic and Pacific markets, and this new Sales Joint Venture enables us to immediately meet this demand.
This Sales Joint Venture is complementary to our Groundhog Project by providing greater access and exposure to international anthracite markets and cash flow that can be reinvested into the Groundhog North anthracite project.
About Atrum Coal Limited
Atrum Coal Limited (ASX:ATU) is a metallurgical coal developer. The Company flagship asset is the 100%-owned Elan Hard Coking Coal Project in southern Alberta, Canada. Elan hosts large-scale, shallow, thick, hard coking coal (HCC) deposits with a current JORC Resource Estimate of 298 Mt (70 Mt Indicated and 228 Mt Inferred). Comprehensive quality testing of Elan South coal on samples from the 2018 exploration program, combined with review of substantial historical testwork data for the broader Elan Project, has confirmed Tier 1 HCC quality.
The initial focus for development is the Elan South area, which is located approximately 13 km from an existing rail line with significant excess capacity, providing direct rail access to export terminals in Vancouver and Prince Rupert. Elan South shares its southern boundary with Riversdale Resources Grassy Mountain Project, which is in the final permitting stage for a 4.5 Mtpa open-cut HCC operation. Around 30km to the west, Teck Resources operates five mines (the Elk Valley complex) producing approximately 25 Mtpa of premium HCC for the seaborne market.
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