XINERGY LTD. DIVERSIFIES ASSET BASE BY CLOSING ACQUISITION ON METALLURGICAL COAL PROPERTY

KNOXVILLE, TN, Jan. 31 /CNW/ - South Fork Coal Company, LLC. a wholly owned subsidiary of Xinergy Ltd., ("Xinergy" or "the Company") a Central Appalachian producer of high quality coal, today announces the closing of an asset purchase ("the Purchase") of property (the "Property") that management considers to have significant high quality, mid-volatility metallurgical coal reserve located in southern West Virginia.   The Property is located in Greenbrier County, West Virginia, approximately 120 miles southeast of the Company's Raven Crest operation.

Jon Nix, Xinergy's Chairman and CEO, said, "This transaction is monumental for our company.  We expect it will be accretive to earnings beginning Q1 2012.  Our estimated capital expenditures for this project will include construction of a batch weigh unit train loadout facility, purchasing surface and support equipment spreads, as well as rehabilitating approximately 7 miles of CSX rail line."

Reserve and Production Estimates

Based on information provided by the previous owner, including a December 2008 report entitled "Project Summary and Preliminary Recoverable Coal Calculations, Prepared for MERAL Inc., Greenbrier Reserve Area" compiled by R. B. (Barry) Doss, PE, PS, MBA of Doss Engineering, Inc., management believes the 14,300 acre Property contains approximately 30.0 million mineral resource tons in the Little Raleigh, Beckley & Fire Creek Coal Beds, locally known as Sewell seams, of which a majority is high quality Mid-Vol metallurgical coal, with the remaining portion being high quality thermal coal.  The Mineral Resource is comprised of 11.95 million tons Measured Mineral Resources; 6.85 million tons Indicated Mineral Resources and 11.2 million Inferred Mineral Resources.  Total Proven and Probable Mineral reserves are estimated to be 8.8 million tons of which 5.75 million tons are Proven Mineral Reserve and 3.05 million tons are Probable Mineral Reserve.  The Company has completed an exploration program and already begun the process to produce a reserve estimate compliant with NI43-101 standards, which will be filed within 45 days.  Additionally, the Company has prepared and will immediately submit the necessary permit application to commence production for a block of the Property referred to as Blue Knob. The Company expects such permits to be issued by late Q3 2011. 

The Company estimates initial production to begin in early Q4 2011 at a rate of 10,000-20,000 tons per month.  The Company anticipates ramping up to a run rate of 600,000 metallurgical tons annually and will expand on production and sales as the Property and market allow. 

Transaction Details

Pursuant to the Agreement, the total aggregate purchase price for this transaction is US$5.2 million and includes US$1.5 million due at closing; US$2.5 million due upon issuance of the necessary permits; and US$1.0 million due eighteen calendar months after the first permit payment.  In addition to the purchase price, Xinergy will pay an overriding royalty to the seller paid at the rate equal to US$1.50/ton for all coal sold at a sales price equal to or less than US$150/ton or the greater of US$2.00/ton or 1% for all coal sold at a sales price greater than US$150.00/ton.

Bernie Mason, President of Xinergy, stated, "We are pleased to close this transaction at a time when supply for metallurgical coal is tight while global demand continues to surge.  This is a tremendous acquisition to add to our portfolio of assets, and we are excited about developing this asset to its full potential."

R. B. (Barry) Doss, PE, PS, MBA of Doss Engineering, Inc., a Qualified Person and independent within the meaning of National instrument 43-101 has reviewed the data and contents of this news release.

The press release contained above represents forecast of production which indicate a range of possible outcomes and are provided to assist investors with the development of future earnings estimates.  While Xinergy believes these forecasts represent the best estimate of management as to future events, actual events will differ from these forecasts and such differences could be material.  These forecasts are subject to risks identified under "forward-looking statements" below.

About Xinergy Ltd.

Headquartered in Knoxville, Tennessee, Xinergy Ltd., through its wholly owned subsidiary, Xinergy Corp. is engaged in coal mining in eastern Kentucky and West Virginia. Currently, Xinergy sells high quality coal to electric utilities and industrial companies throughout the south-eastern United States. For more information, please visit www.xinergycorp.com.

Forward-Looking Information 

This release contains "forward-looking information" that includes information relating to future events and future financial and operating performance, including management's assessment of Xinergy's future outlook, potential lifting cost and sales prices related to the closing of this Metallurgical project. Forward-looking information should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by which, that performance or those results will be achieved. Forward-looking information is based on information available at the time it is made and/or management's good faith belief as of that time with respect to future events, and such information is subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking information. Important factors that could cause these differences include but are not limited to: changes in contracted sales, the business of the Company may suffer as a result of uncertainty surrounding the Metallurgical deal; the Company may be adversely affected by other economic, business, and/or competitive factors; the worldwide demand for coal; the price of coal; the price of alternative fuel sources; the supply of coal and other competitive factors; the costs to mine and transport coal; the ability to obtain new mining permits; the costs of reclamation of previously mined properties; the risks of expanding coal production; the ability to bring new mines on line on schedule; industry competition; the Company's ability to continue to execute its growth strategies; and general economic conditions. These and other risks are more fully described in the Company's filings with the Canadian Securities Administrators, including its Annual Information Form, available on SEDAR at www.sedar.com. You should not put undue reliance on any forward-looking information. We assume no obligation to update forward-looking information to reflect actual results, changes in assumptions or changes in other factors affecting forward looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking information, no inference should be drawn that we will make additional updates with respect to those or other forward-looking information.


SOURCE Xinergy Ltd.

For further information:

Chris Halouma
Director, Investor Relations

Michael R. Castle
Chief Financial Officer

865-474-7000

Profil de l'entreprise

Xinergy Ltd.

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