The acquisition, which includes assets, permits and leases related to the Powhatan mine in Alabama, gives CanAm a total 98% stake in RAC.
CanAm paid $US1,486,250 for the assets, including $251,931 in cash to JLM and an assumption of up to $1,234,319 in JLM debt, $900,000 of which was due to RAC Mining.
In a separate transaction, RAC has purchased JLM mining equipment for $904,600 and also obtained $72,000 of equipment from a third-party vendor.
The company will also replace $400,000 in reclamation bonds posted by JLM for coal mined at Powhatan. As the reclamation work has been substantially completed by JLM, bond money will be returned to CanAm.
“RAC and JLM have initiated the process of transferring the … permits to RAC, but this process has yet to be completed as a third party has made certain claims to the rights to the ADEM permit #AL077194 and ASMC permit #3868,” CanAm noted.
“The company has consulted with outside legal counsel on this matter and, based on their opinion, management has concluded that there is little risk to the transfer of the permits to RAC [and] management therefore decided to proceed with the closing of the transaction.”
As the permit transfer process is completed, RAC has received state regulatory approval to mine the Powhatan property as the subcontract miner on both permits.
“This transaction effectively doubles our interest in RAC Mining from 49 per cent to 98 per cent and, as such, we will see our share of production double overnight,” CanAm said, noting that the mine’s current production is about 8000 tons per month and its goal is to achieve 10,000-15,000tpm.
“In addition, we anticipate the introduction of highwall mining or auger mining will add between 5000 to 10,000 tons per month to our production. This acquisition will immediately contribute to earnings starting in (quarter four) of our fiscal year ending January 31, 2011.”
RAC took control of Powhatan mining operations on November 8 and expects the transition of operations to be completed in the next couple of weeks.
In related news, the producer has hired Paul Widinski as mine manager. The 35-year coal industry veteran will be responsible for day-to-day operations at Powhatan.
Charles Clay will continue in the position of RAC vice-president. With more than 30 years in Alabama coal, Clay has been involved with the complex for more than five years and will work alongside Widinski in the development of Powhatan.