Hongli Coal & Coke Signed "Tripartite" Agreements With Fangda Special Steel Technology And Henan Shenhuo Group
PINGDINGSHAN, China, Dec. 9, 2013 /PRNewswire-FirstCall/ -- SinoCoking Coal and Coke Chemical Industries, Inc. (Nasdaq: SCOK) (the "Company" or "SinoCoking"), a vertically-integrated coal and coke processor, today announced that Henan Province Pingdingshan Hongli Coal & Coke Co., Ltd. ("Hongli"), a China-based coal and coke producer that the Company controls through contractual arrangements, has signed "tripartite" agreements as follows:
- A grade II coke and clean coke sales agreement with Fangda Special Steel Technology Co., Ltd. ("Fangda") (Shanghai A-share listed: 600507), China's largest automobile spring steel producer, for monthly supply of 6,000 metric tons of grade II coke and 3,000 metric tons of clean coke. Monthly supply is expected to gradually increase over time to fulfill larger requirements by Fangda.
- A coking coal supply agreement with a wholly owned subsidiary of Henan Shenhuo Group ("Shenhuo") (China Shenzhen B-share listed: 000933), one of the six largest state-owned coal enterprises in Henan Province. Per the terms of the agreement, Shenhuo will supply Hongli with the coking coal necessary to manufacture the grade II coke and clean coke for Fangda.
As per the terms of these agreements, Hongli will be able to obtain coal from Shenhuo without using its working capital. Upon Hongli's delivery of coke products, Fangda will pay both Hongli and Shenhuo.
Shenhuo's coking coal production facilities are located 65 kilometers (approx. 40 miles) from Hongli's Baofeng plant. Due to such proximity, coal can be readily transported by trucks, and Hongli's purchase cost is expected to be substantially lower than coal purchased from suppliers outside of Henan. Additionally, Shenhuo's coking coal is a high-quality, high-bonding and high-yield coking coal with low ash and sulfur contents.
The Company estimates Fangda's current coke demand is more than 2 million metric tons annually, which is expected to increase to over 6 million metric tons annually in the near future. As such, the Company believes that its agreement with Fangda will generate steady revenue. The Company is seeking to sign similar supply agreements with other steel manufacturers to offset current soft market conditions.
SinoCoking's Chairman and CEO, Mr. Jianhua Lv noted, "Over the last several years, we have been exploring the availability of high quality coal resources, especially low-ash, low-sulfur and high-energy content coal. The agreement with Shenhuo will provide us with the desired coal to manufacture high-quality clean coke through coke sintering process at our Baofeng plant."
Mr. Lv added, "By way of background, the Baofeng plant received approval to commence commercial production of our clean coke product in August 2013. Due to favorable reception from our customers who have used the product, we have been exploring strategic partnerships with large coal producers and steel enterprises in China to develop a hybrid vertical business model. We expect our "tripartite" arrangements with Shenhuo and Fangda to be the first of many other similar arrangements that we seek to build amongst the coal, coke and steel industries."
Mr. Lv concluded, "We remain committed to our goals and will continue to implement our ambitious business plan. During the last several quarters we have made tremendous efforts, which we believe should begin to yield results starting in fiscal 2014 second quarter."
SinoCoking and Coke Chemical Industries, Inc., a Florida corporation, is a vertically-integrated coal and coke processor that uses coal from both its own mines and that of third-party mines to produce basic and value-added coal products for steel manufacturers, power generators, and various industrial users. SinoCoking has been producing metallurgical coke since 2002, and acts as a key supplier to regional steel producers in central China. SinoCoking also produces and supplies thermal coal to its customers in central China. SinoCoking currently owns its assets and conducts its operations through its subsidiaries, Top Favour Limited and Pingdingshan Hongyuan Energy Science and Technology Development Co., Ltd., and its affiliated companies, Henan Province Pingdingshan Hongli Coal & Coke Co., Ltd., Baofeng Coking Factory, Baofeng Hongchang Coal Co., Ltd., Baofeng Hongguang Environment Protection Electricity Generating Co., Ltd., Zhonghong Energy Investment Company, Henan Hongyuan Coal Seam Gas Engineering Technology Co., Ltd., Baofeng Shuangrui Coal Mining Co., Ltd. and Baofeng Xingsheng Coal Mining Co., Ltd.
For further information about SinoCoking, please refer to our periodic reports filed with the Securities and Exchange Commission.
Forward Looking Statement
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SOURCE SinoCoking Coal and Coke Chemical Industries, Inc.