LONDON (ShareCast) - Atlantic Coal, an AIM-listed coal production company, has exercised its lease option over the fully permitted 410 acre Pott & Bannon anthracite mining property in Pennsylvania, US.
As such, the group will pay $6.0m in cash, coal and shares to Reading Anthracite Company, in addition to warrants over Atlantic Coal ordinary shares, worth $3.0m at 0.75p per share.
As announced earlier this month, the site is estimated to contain up to 13.6m tons run-of-mine coal, equal to around 4.1m tons of washed, saleable anthracite.
The firm explained that the agreement is part of its strategy of increasing its current reserves and production profile, particularly in the Pennsylvania Anthracitic Belt.
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."
He continued: "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 February 15h 2012 and October 29th 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."
The share price rose 3.57% to 0.29p by 09:50.