CALGARY, May 31, 2011 /CNW/ - China Coal Corporation ("China Coal" or the "Company") (TSXV: CKO) is pleased to provide a corporate update on its 75% Coal Bed Methane ("CBM") exploration project located in Xinjiang province, China, and on its previously announced intention to acquire 60% of the newly operating Mei Feng coal mine, also located in Xinjiang province.

With respect to the CBM

  • A little over a year ago, on May 19, 2010, the Company, previously known as JYW Capital Corp. ("JYW"), announced it closed its Qualifying Transaction ("QT") and related financing, as accepted for filing on May 14, 2010 by the TSX Venture Exchange (the "Exchange"). The QT was originally announced on June 25, 2009 and updated on August 25, 2009, and full particulars are disclosed in the JYW CPC Filing Statement dated February 25, 2010.
  • As part of the QT, a plan to explore for CBM in Xinjiang, China, was proposed and approved: the Norwest Corporation technical report.  This report provides for a 3 year exploration program that totals approximately $3.6 million in drilling and the related expenses associated with exploration drilling and permit development.  The Company notes that this exploration work can only be prosecuted in the summer drilling months and can, with proper planning, be initiated and completed in a single drilling season.  The Company intends for this drilling program to be conducted with its 25% Peoples' Republic of China ("PRC") partner, Hami Zhongmei Energy Co., Ltd., which has committed approximately $4.6 million towards the exploration work.
  • During the initial summer 2010 drilling season, only immaterial geological survey work was completed on the CBM lands and no exploration drilling was conducted.  Since the passing of the 2010 drilling season there has been no opportunity to commence an exploration program.
  • Shortly after May 19, 2010, the Company became aware of several nearby acquisition opportunities in coal mining and CBM, and on June 25, 2010, announced that its PRC subsidiary had executed an agreement to acquire 60% of a newly built coal mine (now identified as the Mei Feng coal mine) in Xinjiang province.  This coal mine is now operating.  Thus, as a result of the shortened timeframe for the summer drilling season and the merits of deferring the work program on the CBM lands to at least the 2011 summer drilling season, management determined it was in the best interests of the Company to reallocate original QT cash for a deposit to be applied against the Mei Feng acquisition.
  • The original QT provided that the Company had the power to reallocate funds as deemed necessary.  After the June 25th, 2010 announcement of the intent to acquire the interest in Mei Feng, management reallocated and paid a cash deposit of 22 million RMB or approximately $3.3 million (100% refundable or convertible into a working interest equity position in Mei Feng) to the Vendor of Mei Feng.
  • China Coal is currently continuing to examine opportunities to start and complete exploration on the CBM lands during the summer drilling seasons of 2011/2012.  In order to fund this work the Company will likely call on resources from its PRC partner, but it can also employ other resources.  The Company is therefore confident it can fund and conduct any and all required operations on its CBM lands, as originally described in the QT.
  • The QT documentation also originally identified certain capital contributions that were to be made (to the Company's subsidiary) in 2010 - essentially injections of equity (called registered capital) into China Coal's subsidiary, Xinjiang Huamei Mining Co., Ltd. ("Huamei").  These were required in order to keep the status of the subsidiary active and valid according to PRC private company regulations.  During 2010 and in connection with the deposit made by the Company through its subsidiary identified above, Huamei negotiated with the appropriate PRC regulatory authorities to have the total amount of capital contribution required reduced to a total of $5.4 million.  Given injections previously made and the above referenced reallocation deposit towards the Mei Feng acquisition, the Company met its obligation to inject 75% of $5.4 million by the deadlines referred to in the QT.  Thus, Huamei met this capital hurdle under PRC and permit agreement requirements, and also met one of the two conditions for timed release of escrow shares issued on May 19, 2010.

With respect to Mei Feng coal mine acquisition

  • As previously announced in news releases of June 25, 2010, January 28, 2011, March 17, 2011 and March 28, 2011, the Company intends to acquire a 60% interest in the Mei Feng coal mine.
  • The acquisition of the interest in Mei Feng is an arm's length transaction and no finder's fee is to be paid by China Coal.  Completion of the proposed acquisition is subject to a number of conditions, including but not limited to, Exchange approval. The Mei Feng acquisition is defined as a "Fundamental Acquisition" under Exchange policy and China Coal is in the process of submitting the required documentation to the Exchange, and notes that it may also be required to seek shareholder approval.
  • China Coal intends to finance this acquisition by way of cash on hand, credit available to its Chinese subsidiary, Huamei, and an equity financing to be announced in due course.

About China Coal Corporation

China Coal is focused on the acquisition of existing producing, or formerly producing, coal mines, properties, and related assets in China. The Company will provide capital to increase production, enhance productivity, and focus on compliance with Chinese regulations. These cash-flowing properties supply coal to one of the fastest growing economies in the world. China relies on coal to supply over 70% of its primary energy consumption.

On behalf of the Board of Directors


"Mark Roth"

Chief Financial Officer and Director

This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities of the Company in the United States.  The Company's securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

WARNING: This news release may contain forward looking statements based on assumptions and judgments of management regarding future events or results that may prove to be inaccurate as a result of exploration and other risk factors beyond its control, and actual results may differ materially from the expected results.


SOURCE China Coal Corporation

For further information:

Head Office:
+1403 452 8806;  FAX +1403 452 8892
Mark Roth, CFO; Ray Fong, CEO
Brad Bloomer, Corporate Development, +1613 851 5156

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