Entry into coal lease agreement and royalty arrangement on contiguous coal property
Bens Creek Group plc (AIM:BEN), the owner of a metallurgical coal mine in North America supplying the steel industry, announces that Ben’s Creek Operations WV LLC (“BC Operations”), a wholly owned operating subsidiary of the Group, has, on 15 December 2021, entered into a lease agreement (the “Lease”) with M.G.C., Inc. (“MGC”) on a property adjacent to the existing Bens Creek mine located in Stafford District, Mingo County, West Virginia. The property covers approximately 1,200 acres. The Lease confers certain mining rights to BC Operations on the property and covers the terms of a royalty arrangement with MGC, as set out below. The Lease will enable BC Operations to undertake metallurgical coal production from such reserves that may exist on the property.
The term of the Lease is for a five year period from 15 December 2021. BC Operations may renew and extend the Lease for an additional five year term. If prior to the expiration of the extended term, BC Operations has commenced and is pursuing mining operations on the property then the Lease shall automatically be extended on a year-to-year basis thereafter until mining operations are completed. BC Operations will be required to put in place all the necessary mining permits prior to commencement of mining, including a West Virginia mining quality discharge permit (NPDES permit).
The key terms of the royalty arrangement as set out in the Lease are:
· $50,000 annual minimum royalty payment, recoupable against earned royalties and any necessary mine development costs, with the first royalty payment being settled on execution of the Lease and a further up to nine payments of $50,000 being made on an annual basis thereafter;
· where BC Operations owns: (i) the coal only; or (ii) the surface or surface mining rights, BC Operations agrees to pay MGC an amount equal to 4% of the net selling price of coal mined whether mined by surface, highwall or underground methods of mining;
· where BC Operations owns both the coal and the surface or surface mining rights, BC Operations agrees to pay MGC an amount equal to 7% of the net selling price of coal mined by surface or highwall methods of mining; and
· for coal mined by the deep mining method, BC Operations agrees to pay MGC an amount equal to 4.5% of the net selling price for coal mined.
Adam Wilson, Chief Executive Officer of Bens Creek, commented:
“As announced on 15 December 2021, part of the Group’s existing strategy is to evaluate prospective lease and royalty arrangements on neighbouring properties and the Board is pleased to enter into a lease agreement on this neighbouring property. The Board believe that the additional acreage will add substantially to the life of the underlying Bens Creek operations and help cement the Group’s position within the industry. The royalty rates we have put in place on the tonnage are similar to the existing Bens Creek mine and, should the Met coal price remain at current levels, be financially attractive for the Group. In due course we intend to quantify the reserves following which we will be well placed to provide a further update for shareholders. We are also in discussions with other owners in relation to adjoining coal properties and are hopeful that they will result in further additional acreage becoming available to us.”
For further information please contact:
Bens Creek Group plc
Adam Wilson, CEO
Raju Haldankar, CFO
+44 (0) 204 558 2300
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