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NewLead Holdings Ltd. (NEWL): Entering in Mining Business

NewLead Holdings Ltd. (NEWL) is an international shipping company that owns a fleet of dry bulk carriers and double-hull product tankers. We provide ideal solutions for sea transportation requirements and play a significant role in meeting the worldwide demand for distribution of petroleum products and dry bulk commodities.

NEWL today announced that the Company has entered into an agreement to acquire title and excavation rights in properties containing 18.6 million tons of estimated coal reserves for $11.0 million. NewLead also entered into an agreement to acquire ownership and leasehold interests in properties containing approximately 143.1 million tons of coal for $55.0 million.

Michael Zolotas, President and Chief Executive Officer of NewLead, commented:

We have expanded our recently launched commodities business with the agreement to acquire an estimated 18.6 million tons of coal reserves. We are in the process of acquiring additional coal properties with reserves estimated at approximately 143.1 million tons. Once we have acquired all of the assets, our coal reserves will consist primarily of sub bituminous B coal, which is 13,500 BTU with low sulfur. We will also have ‘Blue Gem’ and ‘Rich Mountain’ seams of coal, highly sought after in the international market. We believe that our international shipping expertise will allow us to exploit the demand for these coal reserves.
[…] we entered into two agreements to supply coal to third parties. These agreements are expected to generate $873.5 million of revenue over a three-year period. Based on our projections of operating costs, we believe that these sales will have healthy margins and will generate significant cash flow with which to fund continued growth. We intend to supplement the supply agreements by allowing contract miners to mine and pay us a royalty for coal removed.

Coal and Natural Gas Reserve Acquisitions:

  • Acquire title and mineral excavation rights to 5,000 acres of land in Kentucky for reserves in these properties are estimated to be approximately 18.6 million tons.
  • Acquire ownership and leasehold interests in 18,335 acres in Tennessee containing coal and natural gas and other natural resources for$55.0 million that shall be payable in cash in $30.0 million at closing and the remaining $25.0 million on the first anniversary of the closing.
  • Acquire a local coal mining management company in exchange for compensation, paid in the form $3.0 million in common shares of NewLead and a warrant for $6.4 million in common shares of NewLead.

Coal Supply Contracts:

  • Signed two coal supply contracts with creditworthy counterparties for the sale of coal to such parties. Annual revenue from these two contracts is expected to be $184.7 million in the first year, $318.4 million in the second year and $370.4 million for the third and final year.