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UPDATE: Atlantic Coal's US$9mln deal could be transformational, says MD

Atlantic Coal said it has exercised its lease option over the Pott & Bannon coal mine in Pennsylvania – a deal described by managing director Steve Best as “potentially transformational”

--adds broker comment and share price--

Atlantic Coal (LON:ATC) said it has exercised its lease option over the Pott & Bannon coal mine in Pennsylvania – a deal described by managing director (MD) Steve Best as “potentially transformational”.

He believes the addition of the property, which is just 25 miles from the firm’s Stockton colliery, could treble the company’s existing reserves.

The 410-acre site, near New Castle Township, Schuylkill County, is estimated to contain up to 13.6mln tonnes of coal, equating to around 4.1mln tonnes of washed, saleable anthracite.

Atlantic will pay US$6mln in cash to the Reading Anthracite Company to acquire the open-cast mine, as well as granting US$3mln-worth of warrants.

The group said it continues to assess the potential of other assets in America’s Pennsylvanian Anthracitic Belt.

MD Best said: “The Pott & Bannon site, which the board estimates has the potential to more than treble Atlantic Coal’s existing reserves, is a potentially transformational addition to our Pennsylvanian portfolio and having minimised the cash portion payable as part of the transaction, we believe that this represents value for shareholders.

“We intend to pursue an early route to production at the property and are currently in the process of producing a detailed mine plan and updated reserve report.

“We intend to commence operations over the next 12 months and envisage this to be a stand-alone project, benefitting from excellent local infrastructure and robust regional demand.

“Additionally, with only 25 miles separating Pott & Bannon from our existing Stockton Colliery, where we recently reported record production, we believe that we will be able to take advantage of the potential synergies that exist with our current operations.”

Small cap broker Fox-Davies liked the news as it stuck to its ‘buy’ recommendation and 1p target price.

“Given the close location to its existing operation and the fact that the product is the same anthracite, there should be synergistic benefits,” said the broker.

“Further, the stripping ratio is significantly lower than Stockton, so saleable anthracite should be cheaper to produce.”

Shares lifted 1.8% to 0.285p.

Ian Lyall
Ian Lyall
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Normally it wouldn’t merit mentioning the share buying activity of the wife of the MD and a non-executive director. However in the case of Atlantic Coal, they are two in a series of stock purchases dating back to October that have piqued the interest of investors. In that time the share price has advanced around 45%.

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