Paringa has executed its ‘cornerstone’ coal sales agreement with LG&E and KU, two of the largest fuel buyers within the Company's initial target Ohio River Market. The coal sales agreement is for the Buck Creek No.1 Mine's 11 200 Btu/lb coal specification and will be sold at the proposed Green River barge load-out facility on an F.O.B. Barge basis.
The coal sales agreement is a 7-year contract covering an initial 2-year construction period (2016 to 2017) and a 5-year production period (2018 to 2022). The agreement requires Paringa to meet certain construction milestones in developing the Buck Creek No.1 Mine.
LG&E and KU are subsidiaries of PPL Corporation, a diversified US energy company that has a market capitalisation of approximately US$22.2 billion. Execution of the cornerstone coal sales agreement will enable Paringa to facilitate final negotiations with financiers to develop the low-capex Buck Creek No.1 Mine.
Paringa's President and CEO, Mr. David Gay, said: "I am very excited that Paringa has executed its cornerstone coal sales agreement with LG&E and KU. The contract is the culmination of over a year of due diligence, negotiations, documentation and approvals on both sides. We are very proud to be contracting with LG&E and KU and we will look forward to contracting additional coal sales as we move towards production."
Based on feedback from Paringa's potential ‘tier-1’ customers within the Ohio River Market, the Buck Creek No.1 Mine's Coal Handling and Preparation Plant was redesigned as part of the Pre-Feasibility Study released to the ASX in March 2015, to produce both a fully-washed and a blended product. It is estimated that 30% of total sales from the Buck Creek No.1 Mine will be a fully washed 11 800 btu/lb product and 70% of total sales will be a 11 200 btu/lb product.
Paringa is expected to begin production at the Buck Creek No.1 Mine in 2018, reaching full production of 3.8 million tpy by approximately 2020. Under the coal sales agreement, Paringa is contracted to deliver a total of 4.75 million t over a 5-year period of its 11 200 btu/lb product, with 750 000 tons to be delivered in 2018 and 1 000 000 tons to be delivered in each year from 2019 to 2022.
The Buck Creek No.1 Mine's direct barge access to the Green and Ohio River systems provides a significant transportation advantage. The LG&E and KU coal sales agreement calls for fixed sales prices based on a Free-on-Board Buck Creek No.1 Green River Barge Price", which is equivalent to a price for selling coal at the end of the Buck Creek No.1 Mine's conveyor belt at the Green River barge load-out facility.
The contracted fixed coal sales prices for Paringa's 11 200 btu/lb coal spec begins at US$44.50 per ton in 2018, escalating to US$48.20 per ton in 2022. By adjusting for heating content, the equivalent 11 800 btu/lb coal price implied under this coal sales agreement is US$46.88 for 2018, increasing to US$50.78 by 2022.
Edited from press release by Angharad Lock
Read the article online at: https://www.worldcoal.com/coal/19102015/paringa-announces-coal-sales-contracts-totalling-us220-million-with-a-major-utility-3035/