25 Nov 2016 07:00
REGENCY MINES PLC
("Regency" or the "Company")
Metallurgical Coal - Heads of Terms
25 November 2016
Regency Mines Plc ("Regency" or the "Company"), the natural resource development and investment company is pleased to announce a Heads of Terms has been signed by Regency to acquire a significant shareholding in Carbon Minerals Corporation ("CMC"), a Delaware Company which has entered into an agreement to acquire the Rosa metallurgical coal mine (the "Rosa Mine") located in Alabama, United States of America in the Warrior Coal Basin.
Key Highlights:
· Regency has signed a conditional binding Heads of Terms to acquire a 20% shareholding in CMC, a special purpose company formed to hold the Rosa Mine which is being acquired for an aggregate consideration of US$1.65 million payable US$25,000 monthly plus a royalty per ton produced;
· Regency to pay an initial refundable cash deposit of £50,000 with a further £200,000 due after due diligence and completion of a shareholders' agreement, expected to be on or before 23 December 2016;
· The Rosa Mine received in 2010 a NI 43-101 report prepared by McGehee Engineering Corporation stating that Phase 1 of the Rosa Mine project contained Proven Reserves of 453,000 tons of coal at an average 14,070 BTU/lb with 5.14% average moisture content and 4.45% average ash content;
· Assumptions to be tested as part of the due diligence include that CMC will start coal production at Rosa Mine within three months and will before then utilise the preparation plant on site to wash coal on behalf of third parties;
Andrew Bell, Chairman of Regency Mines comments: "This is an opportunity for Regency Mines to acquire a stake in a metallurgical coal project in a safe jurisdiction which appears to have potential for early cash flow. In the event that after due diligence we proceed, the shareholders' agreement will contain a payout provision to ensure regular distributions, as well as normal shareholder protections.
The Rosa Mine comes with a substantial NI 43-101 coal Reserve, valuable infrastructure and permits, and a plan to start full coal production very shortly. Moreover the gross project Reserve of some 450,000 tons of metallurgical coal is derived from less than 20% of the initial mine lease area with further upside potential from additional local mine acquisitions.
The price of metallurgical coal, like that of other key steel inputs like manganese, has risen considerably recently and the Rosa Mine is expected to be a low cost operator. There is a good local demand for this type of coal within Alabama.
The team at Regency are pleased to secure this Heads of Terms offering an opportunity to participate in a near term cash generative coal production project with expansion potential. This is in line with our focus on cash flow generation and on acquiring key strategic interests while capital values remain depressed.
We will be providing further information to market in respect of this project opportunity shortly."
This announcement contains inside information for the purposes of Article 7 of EU Regulation 596/2014.
Glossary
BTU: British Thermal Unit, the amount of work needed to raise the temperature of one pound of water by one degree Fahrenheit. In the U.S.A., the energy content of fuels is commonly expressed in BTUs. One BTU approximately equals 1055 joules.
Mineral Reserve: the economically mineable part of a Measured or Indicated Mineral Resource demonstrated by at least a Preliminary Feasibility Study, including adequate information on mining, processing, metallurgical, economic, and other relevant factors that demonstrate, at the time of reporting, that economic extraction can be justified.
NI 43-101 National Instrument 43-101, a Canadian set of rules and guidelines setting standards of disclosure for mineral projects, based on the Standards of Disclosure for Mineral Projects of the Canadian Institute of Mining.
Proven Mineral Reserve: the economically mineable part of a Measured Mineral Resource, with the highest degree of confidence in the estimate, restricted to that part of the deposit where production planning is taking place and for which any variation in the estimate would not significantly affect the potential economic viability of the deposit.
Ton: a short ton, the measure commonly in use in the U.S. coal industry, and consisting of 2,000 lbs rather than 2,240 lbs
For further information, please contact:
Andrew Bell 0207 747 9960 Chairman Regency Mines Plc
Scott Kaintz 0207 747 9960 Executive Director Regency Mines Plc
Roland Cornish/Rosalind Hill Abrahams 0207 628 3396 NOMAD Beaumont Cornish Limited
Jason Robertson 0129 351 7744 Broker Dowgate Capital Stockbrokers Ltd.