The company now has a 60% interest in the mine in PanXian, Guizhou Province, which currently produces about 150,000 tons annually of high-quality, low-sulfur metallurgical coal and is expanding to 300,000tpa by 2012.
The deal’s effective date was March 15. It is expected to generate as much as $US36 million in annual revenue to L&L’s bottom line, based on current capacities, at an average price of $240/t.
Net income benefits from the transaction for the fiscal year ending April 30, 2012, are estimated at $11 million.
The agreement outlines that L&L and current owner DaPing will form a US joint venture company in China, for which L&L will contribute $18 million in exchange for management control and 60% equity of the new JV company on a net equity basis.
L&L, which will transfer the purchase price in installments, will invest $3 million in capital expenditures to improve safety and efficiency at DaPing. The current owner will contribute mining rights to the deal as well as all mine-related assets.
"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,” L&L chairman Dickson Lee said.
“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."
