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SinoCoking Announces Consolidator Status and Identifies Twelve Additional Targets

^{Published on 2010-06-09 04:15:50 - Market Wire}
 

PINGDINGSHAN, China--([ BUSINESS WIRE ])--SinoCoking Coal and Coke Chemical Industries, Inc. (NASDAQ: SCOK) (the aCompanya or aSinoCokinga) today announced that it has received approvals from both the Baofeng County government and the municipality of Pingdingshan, to act as a county-wide coal mine consolidator. In effect, the declaration by Baofeng County and Pingdingshan make SinoCoking one of only seven private enterprises qualified to bid upon and acquire smaller coal mines in Pingdingshan, and the only company with consolidator status in Baofeng County.

"We believe county-wide consolidator status provides us with a significant opportunity to vastly expand our access to raw thermal and metallurgical coal"

With total estimated reserves of 620 million tons, Baofeng County of Henan province is a principal coking coal-producing area in central China. Currently, there over 22 mines in Pingdingshan which SinoCoking has identified as potential targets for acquisition, and each of which is currently licensed to produce up to 150,000 tons of thermal and metallurgical coal per year.

aWe believe county-wide consolidator status provides us with a significant opportunity to vastly expand our access to raw thermal and metallurgical coal,a said Jianhua Lv, SinoCokinga™s Chief Executive Officer. Mr. Lv further remarked, aSinoCoking applauds the decisions of the municipal and county governments to grant us consolidator status, and we feel this is the right decision because SinoCokinga™s new 900,000 ton per year coking factory is now being constructed in the heart of Baofeng County and Pingdingshan, and once completed it will strengthen our regiona™s coke production and export capacity, which will add to the many positive contributions our company has made to the growth of the regional economy.a

The Peoplea™s government of Baofeng County issued a written declaration (government document [2010] No.20), and the Coal Merger and Restructuring Authority of Pingdingshan also issued a written declaration (government document [2010] No.1), together which stipulate that SinoCoking (locally known as aHenan Pingdingshan Hongli Coal & Coke Ltd.a) shall serve as a qualified corporate entity that is permitted to consolidate smaller coal mines with an annual production of 150,000 tons or less per year within the county. The declaration further provides that consolidator status shall remain in effect until the consolidatora™s annual coal production capacity reaches or exceeds 1 million tons.

Mr. Lv further added, aWith the strong support from the county government and the city government, we believe are on our way to becoming one of the most significant vertically-integrated coal and coke producers and processors in our region.a

Aside from target companies identified in February 2010, SinoCoking has entered into discussions with an additional twelve private mining companies in the region, and intends to acquire a majority interest in each of these companies, or their mining assets, during 2010. These additional target companies are:

• Pingdingshan Yangguanying Coal Ltd., based in Miaohou Village, west of Shuiku road, Zhanhe district, Pingdingshan;
• Baofeng Rongfa Coal Ltd., based in Shangzhang Village, Zhangbaqiao Town, Baofeng County;
• Baofeng Shunli Coal Ltd., based in west of Zhaozhuang Village, Daying town, Baofeng County;
• Baofeng Yuyuan Coal Ltd., based in Jialing Village, Zhangbaqiao Town, Baofeng County;
• Ruzhou Shunxiang Coal Ltd., based in Xiaotun Town, Ruzhou City;
• Pingdingshan Shilonng Tianshun Coal Ltd., based in Gongren Village, Nangu Town, Shilong District, Pingdingshan;
• Pingdingshan Shilong Zhuyuan Coal Ltd., based in Junying Village, Shilong District, Pingdingshan;
• Ruzhou Dongsheng Coal Ltd., based in Dayu Town, Ruzhou City;
• Ruzhou Jialing Coal Ltd., based in Xiaotun Town, Ruzhou City;
• Ruzhou Xiaotun Fanxi Fojunmiao Coal Ltd., based in Xiaotun Town, Ruzhou City;
• Pingdingshan Shilong Xinxin Coal Ltd., based in Zhang Zhuang Village, Shilong District, Pingdingshan; and
• Pingdingshan Shilong Jinyuan Coal Ltd., based in Zhaoling Village, Shilong District, Pingdingshan.

The aggregate licensed production capacity of the mines operated by these target companies is 1.8 million metric tons per year. In addition, the aggregate coal reserves of these companies is estimated to be in excess of 24 million metric tons, based on Chinese geological standards. The Company has completed its own due diligence investigation of each prospective target company, and it is anticipated that the purchase price for the acquisition of each target company will be paid in installments using the Companya™s current cash and future cash flows from the target companies once acquired.

SinoCoking believes it can acquire each of these targets at an attractive purchase price and without relying upon external capital, instead using internally-generated cash flow and its own common stock. The target companies are required to either agree to consolidate with a qualified consolidating entity, or face government-mandated closure. Although management believes the target companies it has identified are viable, no assurance can be provided that any of them will meet managementa™s criteria, that acquisition agreements will be negotiated on terms acceptable to the company, or that the proposed acquisitions will be consummated.

SinoCoking also noted that its acquisition opportunities are only one element of its expansion plan, and that SinoCoking remains focused on the continued construction of its newly planned state-of-the-art coking plant with an expected production capacity of 900,000 metric tons per year.

About SinoCoking

SinoCoking Coal and Coke Chemical Industries, Inc., a Florida corporation (NASDAQ: SCOK) is a vertically-integrated coal and coke processor that uses coal from both its own mines and that of third-party mines to produce basic and value-added coal products for steel manufacturers, power generators, and various industrial users. SinoCoking currently has mining rights and capacity to extract 300,000 tons of coal per year from its own mines located in the Henan Province in central China. SinoCoking has been producing metallurgical coke since 2002, and acts as a key supplier to regional steel producers in central China. SinoCoking also produces and supplies thermal coal to its customers in central China. SinoCoking, a Florida corporation, owns its assets and conducts its operations through its subsidiaries, Top Favour Limited, a British Virgin Islands holding company, Pingdingshan Hongyuan Energy Science and Technology Development Co., Ltd. (aHongyuana), Henan Province Pingdingshan Hongli Coal & Coke Co., Ltd. (aHonglia), Baofeng Coking Factory, Baofeng Hongchang Coal Co., Ltd. and Baofeng Hongguang Environment Protection Electricity Generating Co., Ltd.

For further information about SinoCoking, please refer to our periodic reports filed with the Securities and Exchange Commission.

This press release contains forward-looking statements, particularly as related to, among other things, the business plans of the Company, statements relating to goals, plans and projections regarding the Company's financial position and business strategy. The words or phrases aplansa, awould be,a awill allow,a aintends to,a amay result,a aare expected to,a awill continue,a aanticipates,a aexpects,a aestimate,a aproject,a aindicate,a acould,a apotentially,a ashould,a abelieve,a athinka, aconsidersa or similar expressions are intended to identify aforward-looking statements.a These forward-looking statements fall within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934 and are subject to the safe harbor created by these sections. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of risks and uncertainties. Such forward-looking statements are based on current expectations, involve known and unknown risks, a reliance on third parties for information, transactions or orders that may be cancelled, and other factors that may cause our actual results, performance or achievements, or developments in our industry, to differ materially from the anticipated results, performance or achievements expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from anticipated results include risks and uncertainties related to the fluctuation of local, regional, and global economic conditions, the performance of management and our employees, our ability to obtain financing, competition, general economic conditions and other factors that are detailed in our periodic reports and on documents we file from time to time with the Securities and Exchange Commission. Statements made herein are as of the date of this press release and should not be relied upon as of any subsequent date. The Company cautions readers not to place undue reliance on such statements. The Company does not undertake, and the Company specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement. Actual results may differ materially from the Company's expectations and estimates. The Company provides no assurances that any potential acquisitions will actually be consummated, or if consummated that such acquisitions will be on terms and conditions anticipated on the date of this press release, and the Company makes no assurances with regard to any results of any such acquisitions.