America West Resources signs LoI to acquire a Chinese coal coking plant
Thursday, Dec 03, 2020

America West Resources a domestic compliant coal producer with mining operations in Central Utah, today announced that it has signed a binding Letter of Intent to acquire the coking coal operations (Luxin) of Shanxi Jiexiu Luxin Coal Gasification Company (Shanxi Jiexiu), an established diversified holdings company based in Shanxi Province, China, which also owns coal mines and a major coal trading operation.

Luxin, (pronounced Loo-chin), operates a state-of-the-art coking coal plant in Shanxi Province with annual production capacity of 600,000 metric tons. Built in 2005 to the highest modern environmental standards, the plant utilizes technology that in addition to producing coke, generates electricity using synthetic gas produced through coal gasification. In the U.S., coal gasification, which also makes post-combustion carbon capture easier, is a significant area of current energy research that has benefited from the $3.4 billion in federal stimulus funds marked for fossil fuels research.

In 2007, Luxin revenues totaled US$129 million and EBITDA was US$30 million. In 2008, the Company achieved annual revenues of US$140 million and EBITDA of US$22 million. For the first six months of 2009, Luxin posted revenues of US$60 million and EBITDA of US$9 million. (Please note that all of the aforementioned financial data is subject to formal audit prior to the closing of the transaction.) According to a Reuter’s news report published yesterday, demand from steelmakers for metallurgical, or coking coal, is rebounding from last year’s recession, especially in China. The article cites industry authorities who project that Asian consumption will increase to eight billion tons from six billion tons in the next 20 years.

Dan Baker, Chief Executive Officer of America West Resources, stated, “Through the acquisition of the majority interest in Luxin and the vertical integration of its coking coal plant into our operating platform, America West effectively diversifies our business, establishes a critical gateway to China, and materially strengthens our financial profile. As such, we believe we are much better positioned to pursue a listing on a national exchange on an accelerated timetable. Moreover, because this acquisition is ideally aligned with our Company’s long term met coal export strategy, America West looks forward to optimizing our met coal assets while further strengthening ‘westward’ coal export to Asia through U.S. west coast channels.”

The transaction will be structured as a 30-year Contractual Joint Venture (CJV), an approved form of foreign investment in China. The terms of the proposed transaction provide for America West to acquire a 70% equity interest in an offshore company, which will hold an 80% interest in the CJV, for a total combined stock and cash deal valued at $40 million. Shanxi Jiexiu’s current management will retain the remaining 30%. In addition to the stock issued in the transaction, America West will contribute $30 million in working and expansion capital to the CJV in tandem with the closing of the transaction, while Shanxi Jiexiu will contribute the coking plant assets. Furthermore, the CJV will have contractual rights to metallurgical coal production from Shanxi Jiexiu’s coal mining subsidiary to ensure a steady low-cost raw materials supply. The coal mining subsidiary is actively engaged in mining metallurgical coal deposits in the prolific coal producing region of Shanxi Province; reserves are estimated at over 100 million tons. Following the closing of the transaction, Shanxi Jiexiu will manage the day-to-day operations at the Luxin plant with oversight from America West Resources.

In addition to conducting full due diligence and signing definitive CJV documents, the successful completion of the transaction is subject to America West raising required working and expansion capital for the CJV, as noted above. Notwithstanding any unforeseen delays or difficulty in securing equity financing, the transaction is anticipated to close in the first quarter of 2010.

About America West Resources, Inc.

Headquartered in Salt Lake City, Utah, America West Resources is an established domestic coal producer focused on the mining of compliant (low-sulfur) coal and its sale primarily to U.S. utility companies for use in generating electricity. The Company operates the Horizon Mine, which has recoverable compliant coal reserves under lease of approximately 19 million tons.

Source: PR Newswire

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