L&L Energy (NASDAQ: LLEN) continues to move forward on its consolidation efforts in Guizhou Province. Recent months have seen a flurry of acquisition activity with Union Energy, a strategic partner of LLEN.
LLEN’s first venture with Union Energy was the acquisition of Weishe Mine (“Weishe”), a newly constructed mine in HeZhang County, Guizhou. Weishe, which just completed its final safety inspection, is expected to produce 150,000 tons of coal in its first year of operation and will expand to 450,000 tons annually. In June, the HeZhang County government designated Weishe as a model mine for its modern design, safety equipment, and management practices.
More recently, LLEN entered two memorandums of understanding with Union Energy for the acquisitions of the Lashu and LuoZhou mines, which are also located in HeZhang County. Lashu, scheduled to enter production in the fall of 2012, is approved for production of 300,000 tons per year and has an estimated 7.2 million tons of reserves. LuoZhou, currently in trial production and with reserves of 27 million tons, will reach its approved production rate of 150,000 tons per annum by the fall of 2012. Both Lashu and LuoZhou are each targeted for expansion to 450,000 tons annually.
“We are successfully implementing our consolidation strategy in HeZhang County with Union Energy,” stated Dr. Syd Peng, a mining expert and Director of LLEN. “LuoZhou and LaShu will upgrade our existing mining portfolio, increase our total accessible reserves, and provide added coal to expand our wholesale operation, driving profits and growth.”
LLEN’s wholesale business also received a boost in July with the support from China Construction Bank (“CCB”), one of the four largest state-owned banks in China. CCB offers accounts receivable factoring to select companies and will help LLEN service large customers such as Datang International Power Generation Co. Ltd. (“Datang”). LLEN made its first shipment of coal to Datang’s HeShan power plant in June. While many suppliers in the region lack efficient delivery capabilities, LLEN has established the necessary rail and logistics network to service major customers in Guizhou and surrounding provinces.
LLEN director and former senior executive for mining giant Shenhua Group, Jingcai Yang, commented, “The support shown by China Construction Bank is another positive step forward for L&L. By solidifying a financing facility with such a reputable partner, we will strengthen our position in the marketplace and further reinforce our capabilities to service major enterprises such as Datang.”
The progress LLEN has made in recent months positions the company for rapid expansion in fiscal 2013. With the support of the Guizhou government to consolidate mining operations throughout the province, LLEN’s revenue and earnings should continue to grow at a strong pace. This outlook hasn’t gone unnoticed among big investors. In late June the stock traded nearly 3 million shares in one day. According to a recent report, short interest declined from 2.9 million shares to only 1.5 million shares. It’s likely the big volume day was a result of this reduction.
Investors interested in learning more about this exciting opportunity can view a company presentation and interview from our April 2012 conference in New York.
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