TAIYUAN, China, Aug. 5 /PRNewswire-Asia-FirstCall/ -- Puda Coal, Inc. (NYSE Amex: PUDA), a supplier of high grade metallurgical coking coal used to produce coke for steel manufacturing in China and a consolidator of twelve coal mines in Shanxi Province, today announced that on August 1, 2010, Shanxi Puda Coal Group Co. Inc. ("Shanxi Coal"), a subsidiary that is 90% owned by the Company, entered into an Investment Cooperation Agreement (the "Agreement") with Mr. Ming Zhao, Chairman of the board of directors and a principal stockholder of the Company and Jianping Gao, an individual unrelated to the Company to purchase, consolidate and co-develop six coal mines in Pinglu County, Shanghai Province (the "Project"). A committee of the Board of Directors of Puda Coal comprised solely of independent directors negotiated terms of the Agreement on behalf of Puda Coal and approved the Agreement.
"Following the successful acquisition of the first two Pinglu County mines in June 2010, we are excited to reach another milestone in our coal consolidation projects. By partnering with Mr. Zhao and Mr. Gao to co-develop these mines, we will have access to the capital needed to acquire the assets of all six mines simultaneously, thereby accelerating the time frame for the second phase of the Pinglu County project," said Liping Zhu, President and CEO of Puda Coal.
According to the Agreement, Shanxi Coal, Mr. Zhao and Mr. Gao will each contribute 40%, 30% and 30%, respectively, of the total investment needed for the Project. In addition, Mr. Zhao and Mr. Gao agree to transfer 5.5% of their respective voting rights in the project companies, which will hold the coal mines to be purchased under the Project, to Shanxi Coal to enable Shanxi Coal to exercise full operating and management control of the project companies. Upon the formal registration and establishment of the project companies, Mr. Zhao and Mr. Gao will appoint Shanxi Coal as the proxy holder for their investments in the project companies. Shanxi Coal is entitled to purchasing the equity interest of Mr. Zhao and/or Mr. Guo in the project companies at Shanxi Coal's sole discretion at a price determined by an independent professional appraiser.
The Company currently anticipates the total investment needed for the Project will be between $130 million and $160 million, however the actual amount and timing of each investment will be determined as the Project progresses. Once the coal mines to be acquired and consolidated under the Project are operational, to the extent permitted by the Chinese law, at least 80% of the audited annual net profits of the project companies established after the coal mine acquisitions will be distributed to the parties at a ratio that is proportionate to their respective investment. Puda Coal will serve as the sole project manager. For more information on the Agreement please see the Company's current report Form 8-K filed with the Securities and Exchange Commission on August 5, 2010.
"This strategic cooperation further validates the strong commitment and confidence in our Company by our Chairman. Now, our focus next is to reach definitive agreements with the owners of these six coal mines for the asset purchases so that we can advance our mine expansion plans and receive the appropriate business licenses from the Shanxi government," concluded Mr. Zhu.
About Puda Coal, Inc.
Puda Coal, through its subsidiaries, supplies premium high grade metallurgical coking coal used to produce coke for steel manufacturing in China. The Company currently possesses 3.5 million metric tons of annual coking coal capacity. The Company has recently moved upstream into coal mining, as a consolidator and acquirer of coal mines in Shanxi Province, including the Pinglu projects and the Jianhe projects. On September 30, 2009, Shanxi Coal, a 90% indirect subsidiary of the Company, was appointed by the Shanxi provincial government as an acquirer and consolidator of eight thermal coal mines located Pinglu County in southern Shanxi Province. Shanxi Coal plans to consolidate the eight coal mines into five, increasing their total annual capacity from approximately 1.6 million to 3.6 million metric tons. Shanxi Coal received another approval by the Shanxi provincial government to consolidate four additional coking coal mines into one coal mine in Huozhou County. After the completion of the consolidation, the Jianhe project is expected to increase the total annual capacity from 720,000 metric tons to 900,000 metric tons, according to the Shanxi provincial government's approval. For more information, please visit http://www.pudacoalinc.com .
FORWARD-LOOKING STATEMENTS
The information contained herein includes forward-looking statements. These statements relate to future events or to our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. You should not place undue reliance on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could, and likely will, materially affect actual results, levels of activity, performance or achievements. Any forward-looking statement reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. For example, our ability to acquire and consolidate the target coal mines are subject to, among other things, the risks and uncertainties relating to the market and geological conditions, due diligence, negotiation for definitive agreements, etc. which are beyond our control, as well as our management's ability and capacity to execute our coal mine acquisition strategy and manage the coal mine operations. We assume no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
