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News & Analysis UK

Atlantic Coal: M&A in Pennsylvania

January 22, 2013, Tuesday, 10:10 GMT | 05:10 EST | 14:40 IST | 17:10 SGT
Contributed by Fox-Davies Capital

Atlantic Coal plc, the AIM listed opencast coal production and processing company with activities in Pennsylvania, USA, is pleased to announce that it has exercised its lease option over the fully permitted 410 acre Pott & Bannon anthracite mining property in New Castle Township, Schuylkill County, Pennsylvania. Further details of the lease option agreement are contained in the Company's announcement on 3 January 2012.

Pott & Bannon is located 25 miles from Atlantic Coal's existing producing opencast anthracite operation, the Stockton Colliery and is well positioned in close proximity to major east-coast transportation hubs. Like Stockton, the Pott & Bannon site will mine the high quality Mammoth Seam.

As announced on 3 January 2012, at that time and based on information provided to the Company in a report, commissioned by RAC in January 1999 and prepared by John T. Boyd & Company, the Directors believed that the Property could contain up to 13.6 Mt run-of-mine coal, equating to approximately 4.1Mt of washed, saleable anthracite. The average strip ratio was estimated to be 3.9 ROM. Confirming these resource details will form part of Atlantic Coal's initial preparatory work on the Property and will be updated by a qualified person. The consideration is US$6.0M in cash, coal and shares payable to Reading Anthracite Company plus the grant of US$3.0M worth of warrants over Atlantic Coal new ordinary shares at 0.75 pence per share.

Given the close location to its existing operation and the fact that the product is the same anthracite, there should be synergistic benefits. Further, the stripping ratio is significantly lower than Stockton, so saleable anthracite should be cheaper to produce.