The deal allows IPL to purchase 1 million tons of coal from Landree as well as an option to obtain an additional 180,000 tons in 2013 and 2014.
VHGI chief executive officer Doug Martin called the agreement a “major milestone” in its progress; he also called Landree its “linchpin” operation earlier this week as he looked ahead to its growth.
“This is precisely why we have pursued [Landree owner] Lily Group,” he said Thursday.
“Our due diligence indicated that The Lily Group had the ability, infrastructure and opportunity to land major contracts such as this agreement. Based on our projections we are confident that together, we will have additional mining capacity during this period to secure additional high margin contracts for the Landree mine or sell on the spot market, further expanding our profit potential.”
Martin also confirmed that it is currently in talks to sign supply deal with other major utilities, though he did not indicate any specific targets.
In the meantime, VHGI is in its final financing negotiations that will allow it to complete the Lily Group transaction. The contract, he said, was a key component in that.
“[It] provides us with a solid, long-term revenue stream, which has been well received by the financial community,” Martin said.
Lily Group’s sole shareholder Rick Risinger, who now serves as president of VHGI Coal, said that its competitive factors made it attractive to IPL and will also draw in other major companies.
“The quality of our coal, the adjacent rail line and the unique location our mine allows us to ship the coal to certain customers in a very competitive manner, giving us a geographic transportation advantage to the local utilities,” he said.
The companies said in the announcement of the stock purchase agreement earlier this week that it hopes to close on or before a drop-dead date of February 1. Financial terms were not disclosed, though VHGI had loaned Lily more than $US5.5 million prior to the execution of the stock purchase agreement to fund operations and expansion plans.
In addition to energy and mining, VHGI has assets and interests in precious metals and healthcare technology.
