Bens Creek Group plc, a key player in the North American metallurgical coal mining industry, announced a significant coal purchase agreement with Avani Resources Pte Ltd, its largest shareholder. The deal, valued at $60 per ton for 20,000 tons of off-spec coal, underscores a strategic step for Bens Creek amid operational and financial challenges.

Details of the Purchase Agreement and Financial Transactions

Under the terms of this new agreement, Avani Resources will pay Bens Creek Operations WV LLC, a wholly-owned subsidiary of Bens Creek Group plc, a total of $1.2 million. An advance payment of $1.0 million has already been received, with the remaining $200,000 due upon delivery. This arrangement is distinct from the existing long-term offtake agreement between the two companies and aims to provide immediate financial relief to Bens Creek.

The coal involved in this transaction does not meet the typical specifications required for High Vol A or High Vol B metallurgical coal, highlighting the flexibility in trading terms between Bens Creek and Avani. This transaction not only supports Bens Creek’s immediate cash flow needs but also strengthens its ongoing partnership with Avani.

Operational Challenges and Strategic Measures

Bens Creek has faced several operational setbacks since the beginning of 2024, including depressed prices for metallurgical coal and production interruptions at its West Virginia mine. These challenges have severely impacted the company’s financial health, prompting Avani to extend a $10 million working capital facility to Bens Creek. This loan was fully drawn down in early 2024 to mitigate immediate financial pressures.

Despite resuming production, Bens Creek currently operates at a reduced capacity of 30,000 to 35,000 clean tons per month, largely due to earlier waste disposal issues. These operational difficulties have necessitated a temporary removal of one of the company’s highwall miners from the site, further complicating recovery efforts.

Financial Outlook and Industry Context

At the current price levels, with High Vol B metallurgical coal trading at $195 per ton as of April 5, 2024, Bens Creek continues to face profitability challenges. The company’s management is actively exploring various strategies to stabilize operations and improve financial health amidst tough market conditions.

The coal mining sector, particularly for metallurgical coal, remains volatile, with companies like Bens Creek grappling with both market-driven and operational challenges. The company’s ability to navigate these issues will be critical to its sustainability and growth.

Terms of the Coal Purchase Agreement

– Seller: Bens Creek Operations WV LLC

– Buyer: Avani Resources Pte Ltd

– Tonnage: Two unit trains, minimum 10,000 tons each

– Quality Specifications: Moisture 7%, Ash up to 8.5%, Sulfur below 0.85%, Volatile 34-35%, among other specified metrics

– Price: $60 per ton, with $50 per ton paid in advance

– Delivery Schedule: Second half of April to first half of May 2024, subject to scheduling agreements

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