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Atlantic Coal plc/Index: AIM/Epic: ATC/Sector: Mining

21 January 2013

Atlantic Coal plc ("Atlantic Coal" or the "Company")

Exercise of up to 20 year lease option over the 410 acre Pott & Bannon Pennsylvanian anthracite mining property and entry into a conditional coal purchase agreement

Atlantic Coal plc, the AIM listed opencast coal production and processing company with activities in Pennsylvania, USA, is pleased to announce that it has exercised its lease option over the fully permitted 410 acre Pott & Bannon anthracite mining property in New Castle Township, Schuylkill County, Pennsylvania (the "Property"). Further details of the lease option agreement are contained in the Company's announcement on 3 January 2012 (the "Lease Option").

Highlights:

·; Consideration of US$6.0 million in cash, coal and shares payable to Reading Anthracite Company ("RAC") plus the grant of US$3.0 million worth of warrants over Atlantic Coal new ordinary shares at 0.75 pence per share

·; As announced on 03.01.12, at that time the Directors believed that the Property could contain up to 13.6 million tons run-of-mine ("ROM") coal, equating to approximately 4.1 million tons of washed, saleable anthracite* based on information provided to the Company in a report, commissioned by RAC in January 1999 and prepared by John T. Boyd & Company. The average strip ratio was estimated to be 3.9 ROM.*

·; Site located 25 miles from the Company's Stockton site in the productive Pennsylvanian Anthracitic Belt with established infrastructure and industrial and domestic demand

·; Agreement is part of the Company's strategy of increasing its current reserves and production profile, particularly in the Pennsylvania Anthracitic Belt

* There can be no guarantee that these figures remain accurate as at the date of this announcement or that the qualified person's report will reconfirm these numbers and further announcements will be made in this regard at the appropriate time.

Atlantic Coal's Managing Director, Steve 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.

"Importantly, we also continue with our due diligence process over additional anthracite assets in Pennsylvania, further details of which are contained in the Company's announcements on 15 February 2012 and 29 October 2012. These are in line with our long-term strategy of increasing the Company's reserves and production profile, particularly in the Pennsylvania Anthracitic Belt."

Background

Pott & Bannon is located 25 miles from Atlantic Coal's existing producing opencast anthracite operation, the Stockton Colliery and is well positioned in close proximity to major east-coast transportation hubs. Like Stockton, the Pott & Bannon site will mine the high quality Mammoth Seam.

As announced on 3 January 2012, at that time and based on information provided to the Company in a report, commissioned by RAC in January 1999 and prepared by John T. Boyd & Company, the Directors believed that the Property could contain up to 13.6 million tons run-of-mine ("ROM") coal, equating to approximately 4.1Mt of washed, saleable anthracite*. The average strip ratio was estimated to be 3.9 ROM*. Confirming these resource details will form part of Atlantic Coal's initial preparatory work on the Property and will be updated by a qualified person (as defined within the AIM Rules for Companies).

* There can be no guarantee that these figures remain accurate as at the date of this announcement or that the qualified person's report will reconfirm these numbers and further announcements will be made in this regard at the appropriate time.

Lease agreement

Atlantic Coal has confirmed or waived all of the various conditions precedent as contained in the Lease Option relating to due diligence, obtaining all necessary regulatory and shareholders consents and the satisfaction of various other conditions precedent, including the transfer of the relevant permits, and has now entered into a lease of the Property (the "Lease") for an initial period of ten years from the date that Atlantic Coal is first permitted to commence mining at the Property (the "Initial Period"). Following the expiry of the Initial Period, Atlantic Coal will have the option to extend the Lease for two additional five year periods.

The original terms of the Lease Option were announced on 3 January 2012 and included a non-refundable payment of US$250,000 made by Atlantic Coal to RAC in order to secure the Lease Option. At the same time, a further payment of US$250,000 was placed in escrow whilst Atlantic Coal carried out its due diligence and pending exercise of the Lease Option and this is now to be released to RAC.

Further, in consideration for Atlantic Coal confirming or waiving the various conditions precedent as contained in the Lease Option, RAC has agreed to vary the terms for satisfaction of the consideration of US$6,000,000 for granting the Lease to Atlantic Coal as follows:

·; as to the first US$250,000, by the immediate release of the corresponding sum currently held in escrow to RAC;

·; to apply the US$250,000 paid by Atlantic Coal to secure the Lease Option against the sums due in respect of the grant of the Lease;

·; as to the next US$3,000,000, on or before 31 January 2014 by Atlantic Coal making available 25,000 short tons of clean coal at a price of US$120.00 per short ton from its Stockton Mine;

·; as to the remaining US$2,500,000, on the earlier of the first anniversary of the commencement of mining operations at the Property and 31 December 2015 and this sum shall be satisfied in: (1) tons of ROM or clean coal from any mine controlled by Atlantic Coal; (2) by the issue and allotment of a corresponding number of new ordinary shares (to be determined by Atlantic Coal's VWAP for the preceding three months) in Atlantic Coal to RAC (or, in certain circumstances, to RAC's shareholders) (the "Consideration Shares"); or (3) in any combination of (1) and (2). The exact method of satisfaction will be agreed between Atlantic Coal and RAC in advance. If the parties cannot agree, then each party will have the right to designate how half of the US$2,500,000 will be satisfied.

RAC will also be issued with warrants to subscribe for up to US$3,000,000 worth of new ordinary shares in Atlantic Coal at a price of 0.75 pence per share for five years from the grant of the Lease (the "Warrants"). A circular will be sent to shareholders at the appropriate time so as to enable the Consideration Shares and the Warrants to be issued to RAC.

Atlantic Coal has agreed to use its best endeavours to employ mining equipment at the Property to achieve a minimum production of 400,000 tons of ROM coal in the second year of the Lease, provided that market conditions warrant such a level of production.

Coal purchase agreement

Under the terms of the Lease, RAC will have the annual option to purchase (at certain pre-agreed prices) up to 50 per cent. of all sizes of standard coal provided that the standard coal meets certain specifications. Further, until Atlantic Coal constructs a processing plant at the Property, RAC will have the right to purchase all of the raw coal mined by Atlantic Coal at the Property at certain pre-agreed prices. Should Atlantic Coal determine that it will not construct a processing plant at the Property, then RAC's right to purchase all of the raw coal mined by Atlantic Coal at the Property will reduce to 50 per cent. of all of the raw coal mined by Atlantic Coal at the Property. Finally, RAC will be granted the right of first refusal in respect of the purchase all coal which does not meet certain pre-determined specifications.

However, in the event that any portion of the US$2,500,000 consideration is paid by Atlantic Coal to RAC in the form of ROM or clean coal from the Property, then the RAC's right to purchase 50 per cent. of all sizes of standard coal from the Property shall be reduced on a ton-for-ton basis at the price of US$120 per ton until such time as the entire consideration has been satisfied in full at which point RAC's purchase option rights under the coal purchase agreement will be restored in full.

**ENDS**

For further information on the Company, visit: www.atlanticcoal.com or contact: