Under a trial deal between L&L’s TaiFung Coal division and HunTai inked July 10, L&L will get a management fee for running the 600,000-ton capacity facility and it will also collect revenues for wholesaling the washed output.
The new portfolio addition, which expands L&L’s washing operations in the region, is projected to generate additional wholesale revenue for the company of about $US63 million, and $5.9 million in net income based on pricing of $160 per ton.
L&L’s management fee will total $500,000 over the coming 12 months.
The plant is in close proximity to its target customer, Yunnan Coal Energy, which needs about 3 million tons of washed coking coal annually.
“Through management innovation, the company is able to synergize its expertise with other entities to produce more revenue and profit,” vice president and director Ed Moy said.
To date, 2012 has been an unprecedented year of growth for L&L; late last week, the Seattle-headquartered company said it intended to use an equity interest swap with Union Energy as part of its acquisition of the Luozhou mine in China.
Following the acquisition of both Luozhou and another of Union Energy’s mines, Lashu, L&L said it is planning to increase the availability of thermal coal for its wholesale operations.
DaXing, L&L’s recently established wholesale subsidiary in Guizhou, has entered into thermal coal contracts with large end-users, including Datang Power.
Last month Union Energy entered into two MoUs to sell a controlling interest in the two mines to L&L.
Luozhou is scheduled to ramp up to full production this fall, by which time the mine is expected to have reached its approved rate of 150,000 tons per year, with targeted expansion to 450,000t.
The mine is now undergoing trial production, and is expected to generate around $70 million a year in revenues with an estimated new profit margin of 31%.