NewLead Holdings Ltd. Announces Signing Agreement to Acquire Properties with
Estimated Coal Reserves of 18.6 Million Tons; Signing Agreement to Acquire
Properties with Estimated Coal Reserves of 143.1 Million Tons and Securing
3-year Coal Supply Contracts Expected to Generate $873.5 million of Revenue
PIRAEUS, Greece, Jan. 17, 2013
PIRAEUS, Greece, Jan.17, 2013 /PRNewswire/ --NewLead Holdings Ltd. (NASDAQ:
NEWL) ("NewLead") 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
Michael Zolotas, President and Chief Executive Officer of NewLead, stated, "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."
Michael Zolotas continued, "In entering the mining business, we undertook to
secure supply contracts for the coal reserves. Consequently, 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
As of December 28, 2012, NewLead entered into an agreement to acquire title
and mineral excavation rights to 5,000 acres of land in Kentucky. The coal
reserves in these properties are estimated to be approximately 18.6 million
tons. The transaction is subject to execution and delivery of certain
definitive agreements and other closing conditions, but is currently expected
to close by January 29, 2013. There can be no assurance that the transaction
will be consummated. The consideration of $11.0 million was paid in the form
of notes maturing on January 29, 2013. The notes do not accrue interest, but
remain subject to a guaranty by the initial purchaser and are secured by a
mortgage lien and a security interest in the assets being purchased.
NewLead has also entered into an agreement to acquire ownership and leasehold
interests in 18,335 acres in Tennessee containing coal and natural gas and
other natural resources. The agreement contemplates that the Company will
acquire rights, title, permits and leases to coal mines with total reserves
estimated at 143.1 million tons. The transaction is subject to execution and
delivery of certain definitive agreements and other closing conditions, but is
currently expected to close in February 2013. There can be no assurance that
the transaction will be consummated. The agreement contemplates that
consideration of $55.0 million shall be payable in cash in two installments;
$30.0 million at closing and the remaining $25.0 million on the first
anniversary of the closing.
The estimated reserves stated above are as determined by independent
appraisals. The methodology used by the independent appraisers was not
compliant with the methodology required by the Securities and Exchange
Commission ("SEC") in reserve reports and, accordingly, should not be relied
upon. Such reserve information is only provided to give the best currently
available information. NewLead is undertaking to obtain reserve reports that
comply with SEC methodology. Such reports may differ materially from the
information provided herein.
The properties in Tennessee and Kentucky also include natural gas wells and
projects relating to extraction of timber, sand, gravel, fly ash and dimension
stone. Third parties are currently extracting these commodities on the
properties and paying royalties.
Coal Supply Contracts
NewLead 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.
The first contract provides for the sale of 70,000 tons of coal per month for
the first 12 months (840,000 tons annually), increasing to 140,000 tons per
month for the second year (1.68 million tons annually) and 210,000 tons per
month for the third year (2.52 million tons annually). All tonnage is subject
to a variation of 5%. The price was established based on the prevailing market
price for coal at the time the contract was entered into.
The second contract provides for the sale of 130,000 metric tons per month for
the first 12 months (1.56 million metric tons annually), increasing to 210,000
metric tons per month for the second and third years (2.52 million metric tons
annually). All tonnage is subject to a variation of 5%. The price was
established based on the prevailing market price for coal at the time the
contract was entered into.
NewLead intends to source the coal to meet such contracts from the estimated
reserves discussed above, but to the extent it is unable to do so, it will be
required to seek to source the coal from other suppliers at the prevailing
NewLead also entered into an agreement to 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. Such acquisition is subject to a number of terms and conditions and
there is no assurance it will be consummated. The management company shall be
responsible for managing the daily operations of the coal mines and the
excavation of the coal from the properties.
About NewLead Holdings Ltd.
NewLead Holdings Ltd. is an international, vertically integrated shipping and
commodity company that manages product tankers and dry bulk vessels. NewLead
currently controls four vessels, two tankers and two dry bulk vessels.
NewLead's common shares are traded under the symbol "NEWL" on the NASDAQ
Global Select Market. To learn more about NewLead Holdings Ltd., please visit
the new website at www.newleadholdings.com.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
This press release includes assumptions, expectations, projections, intentions
and beliefs about future events. These statements, as well as words such as
"anticipate," "estimate," "project," "plan," and "expect," are intended to be
''forward-looking" statements. We caution that assumptions, expectations,
projections, intentions and beliefs about future events may vary from actual
results and the differences can be material. Forward-looking statements
include, but are not limited to, such matters as the creditworthiness of our
counterparties, the reliability of the reserve reports, our ability to extract
or acquire coal to fulfil contracts, future operating or financial results;
our liquidity position and cash flows, our ability to borrow additional
amounts under our revolving credit facility and, if needed, to obtain waivers
from our lenders and restructure our debt, and our ability to continue as a
going concern; statements about planned, pending or recent vessel disposals
and/or acquisitions, business strategy, future dividend payments and expected
capital spending or operating expenses, including dry-docking and insurance
costs; statements about trends in the product tanker and dry bulk vessel
shipping segments, including charter rates and factors affecting supply and
demand; expectations regarding the availability of vessel acquisitions;
completion of repairs; length of off-hire; availability of charters; and
anticipated developments with respect to any pending litigation. The
forward-looking statements in this press release are based upon various
assumptions, many of which are based, in turn, upon further assumptions,
including without limitation, management's examination of historical operating
trends, data contained in our records and other data available from third
parties. Although NewLead believes that these assumptions were reasonable when
made, because these assumptions are inherently subject to significant
uncertainties and contingencies which are difficult or impossible to predict
and are beyond our control, NewLead cannot assure you that it will achieve or
accomplish these expectations, beliefs or projections described in the forward
looking statements. Important factors that, in our view, could cause actual
results to differ materially from those discussed in the forward-looking
statements include the strength of world economies and currencies, general
market conditions, including changes in charter rates and vessel values,
failure of a seller to deliver one or more vessels, and other factors
discussed in NewLead's filings with the U.S. Securities and Exchange
Commission from time to time. NewLead expressly disclaims any obligations or
undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change in NewLead's
expectations with respect thereto or any change in events, conditions or
circumstances on which any statement is based.
Cautionary Note to U.S. Investors
The United States Securities and Exchange Commission limits disclosure for
reporting purposes to mineral deposits that a company can economically and
legally extract or produce. We use certain terms on this press release, such
as "reserves," "resources," "geologic resources," "proven," or "probable,"
which may not be consistent with the reserve definitions established by the
SEC. U.S. Investors are cautioned not to assume that any part or all of
mineral deposits in these categories will ever be converted into SEC Industry
Guide 7 reserves. U.S. investors are urged to consider closely the disclosure
in our SEC filings to be filed in the future. You can review and obtain copies
of these filings from our website or at http://www.sec.gov/edgar.shtml.
Investor and Media Relations:
NewLead Holdings Ltd.
Telephone: + 30 213 014 8023
SOURCE NewLead Holdings Ltd.
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