American Resources Corp. signed a multi-year deal with an existing customer that will lengthen and expand its current agreement to supply at least 50,000 tons per month of metallurgical coal over the next two years beginning in March 2019.
American Resources will produce, process, and load the coking coal for transport by rail at its McCoy Elkhorn Coal subsidiary located in Pike County, Kentucky. The expanded offtake agreement has an annual fixed price and will generate revenue of more than $58 million, with a total contract value of more than $111 million over the two-year term. The contract will reprice in the second year based on market prices and certain pricing collars, and it also has an option to expand tonnages. The customer has also provided a capital investment to finish the Carnegie No. 1 mine rehabilitation and expansion, as well as production at the company’s PointRock mine.
“We’re very excited about this expanded partnership,” said Mark Jensen, CEO at American Resources Corp. “Having these types of relationships allow 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. We are actively working to increase the coal production at our Mine No. 15, Carnegie No. 1, and PointRock mines to satisfy this order and other sales opportunities for our metallurgical business, in addition to completing development of our Carnegie No. 2 mine to initiate production there as well.”
The current contracted tonnages under this agreement represent approximately 30% of McCoy Elkhorn Coal’s met coal production capabilities based on forecasted capex over the next year.