American Resources Corp. entered into a two-year sales agreement to provide at least 50,000 tons of metallurgical coal per month to a global buyer of metallurgical coal.
The deal lengthens and expands American Resources' current agreement to sell steelmaking coal to the customer starting in March, according to a Jan. 3 news release. The coal is being sold from the company's McCoy Elkhorn Coal LLC subsidiary in Pike County, Ky., and currently contracted tonnages under the agreement represent approximately 30% of the subsidiary's metallurgical coal production capabilities based on predicted capital expenditures over the next year.
The deal will generate revenue of $58 million annually for American Resources with a total contract value of $111 million over the term of the expanded off-take agreement. The unnamed customer also provided capital investment to rehabilitate and expand the Carnegie 1 mine owned by American Resources, the release said.
"Having these type of relationships [allows] us to have our coal broadly distributed to a diverse end-user base and enables us to execute on our growth objectives with a certain level of visibility," American Resources CEO Mark Jensen said. "We are actively working to increase the coal production at our Mine #15, Carnegie 1, and PointRock mines to satisfy this order and other sales opportunities for our metallurgical business, in addition to completing development of our Carnegie 2 mine to initiate production there as well."
The contract includes provisions for market-based repricing, certain pricing collars and options to expand tonnage.
American Resources is a relatively new name in the sector It bought several coal mines during a recent downturn and is focused on growth and becoming one of the lowest-cost operations in Central Appalachia. The company focuses on mining, processing, transportation and selling metallurgical coal and pulverized coal injection to the steel industry.