Celsius Coal (ASX: CLA) should trade firmer today after it signed a non-binding memorandum of understanding to supply coal to a Baosteel subsidiary and China Minmetals Group from its Uzgen Basin Coking Coal Project in Kyrgyz Republic.
Both of these tier-one Chinese companies have operations in the Chinese province of Xinjiang neighbouring the Kyrgyz Republic.
The execution of this agreement demonstrates the strong Chinese customer interest in Celsius' coking coal.
Bayi Steel, the Xinjiang division of Baosteel Group, is the major end-user for coking coal in Xinjiang, and China Minmetals is a major importer and distributor of steel supply chain commodities.
Baosteel Group is China’s second largest and the world’s fourth largest steel maker, and China Minmetals is the largest iron and steel trader; a key state-owned enterprise involved in all aspects of metals and minerals.
The commencement for the delivery of the trial shipments is yet to be agreed, but will occur no earlier than the second quarter, and expire on 31 December 2014.
The primary goal is to facilitate the trial shipment of coking coal, up to 5,000 tonnes, for metallurgical testing and the resolution of transport methods and routes.
Upon successful completion, the MOU covers the potential for long-term supply and purchase arrangements of around 500,000 tonnes of coking coal per annum from 2015 to 2019.
The 500,000 tonnes will be shares between Bayi Steel and China Minmetals, with pricing for deliveries beyond the trial stage subject to negotiation.
Celsius is also pursuing new resource project acquisitions, within Australia and overseas, and is capitalised at $26 million.
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