Prairie Mining Limited Finance & Construction Agreement for Jan Karski (0429O)

TIDMPDZ

RNS Number : 0429O

Prairie Mining Limited

02 November 2016

PRAIRIE MINING LIMITED

NEWS RELEASE | 2 NOVEMBER 2016

PRAIRIE AND CHINA COAL ENTER INTO A FINANCING AND CONSTRUCTION CO-OPERATION AGREEMENT FOR THE JAN KARSKI MINE

Prairie Mining and China Coal, the second largest coal mining company in China and one of the world's most advanced and prolific shaft sinking and total underground coal mine construction companies, have signed a landmark Strategic Co-operation Agreement to advance the financing and construction of Prairie's Jan Karski Mine in Poland.

Under the terms of the agreement, China Coal and Prairie intend to complete a Bankable Feasibility Study by mid-2017, which will provide the basis for an EPC contract and a construction-funding package for the Jan Karski Mine.

HIGHLIGHTS:

-- China Coal No.5 Construction Company Ltd. ("CC5C") and Prairie intend to enter into a full "wrap-around" Engineering, Procurement, Construction ("EPC") contract which will see CC5C construct the Jan Karski Mine ("JKM" or "Project") and procure a debt financing package to fund the development of the JKM

-- CC5C and Prairie, together with the Chinese Government's authorised mine design institute, intend to complete a Bankable Feasibility Study by mid-2017 which will form the basis for Chinese bank credit approval

-- A senior delegation from CC5C recently conducted a site visit to the JKM that included meetings with regional officials and potential Polish sub-contractors and suppliers

-- Prairie will work with a range of Polish mining and engineering specialists, alongside CC5C, to ensure all design and construction conforms to Polish regulations and safety standards

-- Prairie's and CC5C's Strategic Co-operation Agreement demonstrates the increasing economic collaboration between Poland and China following China's proposed "One Belt, One Road" development strategy and highlights Poland's importance as a "One Belt Economy" for accessing key European markets

-- CC5C has been serving the mining industry for 40 years and accounts for 40% of the Chinese market share for coal mine construction, having completed 340 projects in China and overseas including sinking more than 300 major shafts. This agreement fits with CC5C's strategy of increasing its international presence as a major project contractor

-- As the leading underground mining contractor in China, CC5C holds unparalleled expertise in disciplines central to development of the JKM including, shaft sinking, drilling, freezing and overall mine development and installation

-- CC5C's parent company China Coal, is the second largest coal producer in China with total assets of US$50bn and 110,000 employees across 53 subsidiaries. In 2015, China Coal produced 166Mt of coal across 46 open pit and underground coal mines

"Following six months of intensive review of the PFS by China Coal, including comprehensive meetings with management, this agreement successfully ties Prairie to one of the world's largest and most successful coal mine construction firms and is testament to the quality and low-operating cost nature of the Jan Karski Mine," commented Prairie Mining's CEO Ben Stoikovich. "Prairie's team has visited many of China Coal's mine construction projects and operating coal mines, and it is clear that China Coal are world leaders in mining technology and mine construction. They have extremely high engineering, productivity and safety standards that rival the very best Australian and US longwall coal mines. CC5C's expertise, particularly in shaft sinking, has the potential to significantly accelerate the construction schedule of the Jan Karski Mine. Of equal importance is the potential for this transaction to unlock significant financing for the Project from Chinese banks who have a track record of supporting major EPC-led international contracts."

Prairie Mining Group Executive and former Head of the Secretariat of the Polish Prime Minister's Office, Mr. Artur Kluczny said "The Government's economic policy for Poland recognises coal as a pillar of energy security, and calls for the re-industrialisation of the domestic economy. New investment in state of the art and highly efficient new coal mines will boost the mining sector and see Poland's renaissance as a significant coal exporter. By co-operating with China Coal we contribute to establishing new trade and investment links with China which is also seen as a strategic option for the country. Prairie Mining will be integrating Polish experts with the CC5C team to ensure that all local regulatory requirements are met. We are looking forward to seeing CC5C establish their European operating base in Poland."

Deputy General Manager of China Coal No.5 Construction Company, Mr. Sang Hua said, "The Jan Karski Mine is managed by a highly experienced team in Prairie Mining and, with CC5C's shaft sinking and coal mine construction expertise, will no doubt be developed into a world class coal mine. We are excited to have entered into this co-operation agreement with Prairie Mining and see the Jan Karski Mine as a flagship overseas development project for China Coal as part of our strategy to increase China Coal's international presence as a major mine development contractor."

For further information, contact:

 
 Ben Stoikovich 
 Chief Executive 
  Officer 
 [phone] 
 
 Artur Kluczny 
 Group Executive 
  - Poland 
 [phone] 
 
 Sapan Ghai 
 Communications 
 [phone] 
 [e-mail] 
 

China Coal Co-operation Agreement

Prairie Mining Limited ("Prairie") and China Coal No.5 Construction Company Ltd ("CC5C") have been in discussions since 2014 regarding the potential for collaboration in designing and constructing the Jan Karski Mine ("JKM" or "Project").

During this period, Prairie's senior management and technical team have met with CC5C numerous times in China and inspected CC5C's various shaft sinking projects, mine construction sites and state of the art longwall coal mines operated by China Coal.

In October 2016, Prairie hosted a senior CC5C delegation to Poland where they conducted a site visit to the JKM. The delegation was officially welcomed by Lublin regional government officials, and met with various Polish service providers and sub-contractors who could potentially participate in the Project.

The Strategic Co-operation Agreement was signed confirming the intention of the parties to, on a best efforts basis:

(i) complete a Bankable Feasibility Study by mid-2017, which will form the basis of Chinese bank credit approval for project finance;

(ii) based on the results of the Bankable Feasibility Study, enter into a complete Engineering, Procurement, Construction ("EPC") contract under which CC5C will construct the Jan Karski Mine; and

(iii) incorporate relevant Polish content into the design and construction phases, which will include working with a range of Polish specialists, sub-contractors and business partners.

It is the intention of the parties to enter into future binding agreements for CC5C to construct the Jan Karski Mine once the Bankable Feasibility Study is completed successfully and indicative financing terms are given by financing institutions.

China Coal International Strategy and "One Belt, One Road" Initiative

CC5C has been internationally active since 1988. Through CC5C, China Coal expedited the implementation of its strategy to become an internationally competitive project contractor. Globally, China Coal has undertaken and continues to develop several projects across Morocco, Bangladesh, Turkey, Vietnam, India, and Ecuador for clients and partners including:

   --     Vedanta Resources plc - a London-listed, global diversified natural resources group; and 
   --     JSW Group - a leading Indian conglomerate part of the O.P. Jindal Group. 

In 2013, Chinese President Xi Jinping proposed the "One Belt, One Road" development strategy and framework which calls for greater economic cohesion between China and 60 countries throughout Europe, Asia and Africa through building infrastructure, increasing cultural exchanges, and broadening trade.

Poland is considered a key "One Belt Economy" important to Chinese economic access to Europe, most recently demonstrated by meetings between the Chinese and Polish Leaders in June 2016 including signing of cooperative treaties, the opening of a China-Poland trade forum and welcoming of freight trains linking Chengdu and ód , carrying goods between the capital of Sichuan Province and Poland's third-largest city.

Prairie's and CC5C's Strategic Co-operation Agreement demonstrates the increasing economic collaboration between Poland and China.

 
Table 1: Select International Projects undertaken by 
 CC5C 
---------------------------------------------------------------------- 
Morocco 
---------------------------------------------------------------------- 
1991     Jeredah Coal Mine         -- 785 m shaft sinking and 
                                    equipping 
                                    -- Underground development 
-------  ------------------------  ----------------------------------- 
Bangladesh 
---------------------------------------------------------------------- 
2005     Barapukuria Coal          -- 326 m main shaft sinking 
          Mine                      -- 320 m auxiliary shaft sinking 
                                    -- Underground development 
                                    -- Infrastructure and installation 
-------  ------------------------  ----------------------------------- 
2005     Barapukuria Coal-fired    -- Civil work and equipment 
          Power Plant               installation for 1,200 m long 
                                    trestle from coal mine to power 
                                    plant 
-------  ------------------------  ----------------------------------- 
Turkey 
---------------------------------------------------------------------- 
Ongoing  Kinik-Elmadere Coal       -- 790 m shaft sinking (2 shafts, 
          Mine                      790 m each) 

-------  ------------------------  ----------------------------------- 
2011     Karadon Kilimli           -- 716 m shaft sinking 
                                    -- Underground development 
-------  ------------------------  ----------------------------------- 
2011     Kozlu Incirharmani        -- 478 m shaft sinking 
          Coal Mine                 -- 238 m shaft repair 
-------  ------------------------  ----------------------------------- 
2003     Kozlu Coal Mine           -- 580 m shaft repair 
                                    -- 263 m shaft sinking 
-------  ------------------------  ----------------------------------- 
Vietnam 
---------------------------------------------------------------------- 
2013     Ha Lam Coal Mine          -- Supply and installation 
                                    of headgear, shaft equipment 
                                    and winding system 
-------  ------------------------  ----------------------------------- 
2010     Ha Lam Coal Mine          -- Sinking of three shafts 
                                    between 339 m and 420 m 
-------  ------------------------  ----------------------------------- 
India 
---------------------------------------------------------------------- 
Ongoing  Sindesar Khurd Lead-Zinc  -- 1,051 m shaft sinking and 
          Mine                      shaft equipping 
                                    -- Underground development 
                                    -- Surface and underground 
                                    installations 
                                    -- Ramp development 
-------  ------------------------  ----------------------------------- 
2013     Parbatpur Coal Mine       -- Construction of 4 inclines 
                                    totalling 3,780 m 
-------  ------------------------  ----------------------------------- 
2012     Icchapur Coal Mine        -- Feasibility Study Report 
                                    for a mine with capacity of 
                                    2-5 Mtpa 
-------  ------------------------  ----------------------------------- 
2011     Ichhapur plus two         -- 3D high resolution seismic 
          coal blocks               survey over 20.77 km(2) 
-------  ------------------------  ----------------------------------- 
Ecuador 
---------------------------------------------------------------------- 
2016     Coca Codo-Sinclair        -- Procurement and operation 
          Hydropower Project        of winding systems for 2 shafts 
                                    (538 m and 535 m) 
-------  ------------------------  ----------------------------------- 
 

Overview of CC5C

With total assets of US$1.3bn and annual revenues in excess of US$1bn, CC5C is the leading underground mining contractor in China. CC5C currently has over 11,000 employees with expertise in shaft sinking, drilling, freezing, incline construction, mine development, and shaft repair work.

CC5C's parent company China National Coal Group Corporation ("China Coal") is a wholly state-owned coal producer with 110,000 employees across 53 subsidiaries. As at end of 2014, China Coal had total assets of RMB312.2Bn (US$50bn) and operating revenues of RMB96.5Bn (US$16bn) following production of 183Mt raw coal across 46 open pit and underground mines.

China Coal has committed to building an integrated value chain across coal mining, power generation and coal-based chemicals while remaining committed to technological advancement and structural upgrading of the coal industry. China Coal operates across a number of disciplines including:

   --     Coal mine construction - through Prairie's new strategic partner, CC5C 
   --     Coal production and trade - as 2(nd) largest coal producer in China 
   --     Coal mine equipment manufacturing - currently ranked No.1 in China 
   --     Coal mine designing and engineering services - through two leading mine design institutes 
   --     Pit-mouth power generation - 6,740 MW in operation and under construction 

CC5C was locally established in 1970 and currently accounts for 40% of the Chinese mining contractor market with 340 completed projects worldwide. CC5C has designed and constructed the majority of China's key coal projects and made a significant contribution to the country's coal construction industry including:

   --     deepest ever vertical shaft sunk - 1,341m depth; 
   --     largest ever vertical shaft sunk - 10.5m diameter; and 
   --     largest incline driven - 45.51m(2) cross section. 

CC5C owns a vast array of construction equipment capable of simultaneously sinking 30 shafts and developing 20 underground projects. CC5C's current work program includes:

   --     mine development works at 32 mines; 
   --     13 shaft sinking projects with depths up to 1,222m and diameters up to 10.5m; 
   --     5 inclines of up to 20deg inclination and over 2km in length; and 
   --     11 ground freezing projects for shaft / incline up to depths of 860m. 

Featured CC5C Mine Construction Projects

CC5C's technological expertise and ownership of over 100 industry patents in mine construction provides unparalleled ability to undertake projects of significant scale within given timeframes.

CC5C leads the field in shaft sinking through all forms of strata in a timely and efficient manner. Since 2005 alone, CC5C has sunk 38 shafts using ground freezing methods.

 
 Table 2: CC5C Shafts by Freezing since 2005 (metres) 
 No.   Name of Shaft          Depth   Diameter   Freezing   Max Lining 
                                                   Depth     Thickness 
       Dingji Coal Mine 
  1     - Ventilation Shaft    833      7.5        558         2.10 
====  =====================  ======  =========  =========  =========== 
       Gubei Coal Mine - 
  2     Ventilation Shaft      681      7.0        502         2.00 
====  =====================  ======  =========  =========  =========== 
       Xuehu Coal Mine - 
  3     Main Shaft             830      5.0        460         1.70 
====  =====================  ======  =========  =========  =========== 
       Xuehu Coal Mine - 
  4     Auxiliary Shaft        850      6.5        460         1.90 
====  =====================  ======  =========  =========  =========== 
       Xuehu Coal Mine - 
  5     Ventilation Shaft      659      5.5        430         1.70 
====  =====================  ======  =========  =========  =========== 
       Quandin Coal Mine 
  6     - Main Shaft           623      5.0        513         1.70 
====  =====================  ======  =========  =========  =========== 
       Quandin Coal Mine 
  7     - Auxiliary Shaft      651      6.5        500         2.00 
====  =====================  ======  =========  =========  =========== 
       Quandin Coal Mine 
  8     - Ventilation Shaft    548      5.0        523         1.70 
====  =====================  ======  =========  =========  =========== 
       Yuncheng Coal Mine 
  9     - Main Shaft           917      7.0        590         2.15 
====  =====================  ======  =========  =========  =========== 
       Zhaogu No. 2 Coal 
 10     Mine - Main Shaft      712      5.0        615         1.50 
====  =====================  ======  =========  =========  =========== 
       Zhaogu No. 3 Coal 
        Mine - Auxiliary 
 11     Shaft                  740      6.9        628         2.00 
====  =====================  ======  =========  =========  =========== 
       Zhaogu No. 4 Coal 
        Mine - Ventilation 
 12     Shaft                  712      5.2        628         1.60 
====  =====================  ======  =========  =========  =========== 
       Xuehu Coal Mine - 
 13     Ventilation Shaft      739      5.5        450         1.70 
====  =====================  ======  =========  =========  =========== 
       Chensilou Coal Mine 
 14     - Ventilation Shaft    462      5.0        410         1.60 
====  =====================  ======  =========  =========  =========== 
       Zhujixi Coal Mine 
 15     - Main Shaft           993      6.0        529         1.90 
====  =====================  ======  =========  =========  =========== 
       Chenmanzhuang Coal 
        Mine - Auxiliary 
 16     Shaft                  993      6.5        640         2.45 
====  =====================  ======  =========  =========  =========== 
       Shunhe Coal Mine 
 17     - Auxiliary Shaft      777      6.0        500         1.75 
====  =====================  ======  =========  =========  =========== 
       Hubaowan Coal Mine 
 18     - Auxiliary Shaft      582      7.0        600         1.80 
====  =====================  ======  =========  =========  =========== 
       Liliangdian Coal 
 19     Mine - Main Shaft      756      5.0        772         1.50 
====  =====================  ======  =========  =========  =========== 
       Liliangdian Coal 
        Mine - Auxiliary 
 20     Shaft                  781      6.5        800         1.85 
====  =====================  ======  =========  =========  =========== 
       Hulusu Coal Mine 
 21     - Main Shaft           670      9.6        525         1.40 
====  =====================  ======  =========  =========  =========== 
       Hulusu Coal Mine 
 22     - Return Air Shaft     681      8.0        672         1.30 
====  =====================  ======  =========  =========  =========== 
       Menkeqing Coal Mine 
 23     - Auxiliary Shaft      756      10.0       772         1.50 
====  =====================  ======  =========  =========  =========== 
       Bayangaole Coal Mine 
 24     - Auxiliary Shaft      645      9.0        655         2.05 
====  =====================  ======  =========  =========  =========== 
       Hongsi Coal Mine 
 25     - Ventilation Shaft    963      6.0        630         1.80 
====  =====================  ======  =========  =========  =========== 
       Nalinhe Coal Mine 
 26     - Auxiliary Shaft      588      10.5       521         2.50 
====  =====================  ======  =========  =========  =========== 
       Honger Coal Mine 
 27     - Main Shaft           525      5.5        409         1.45 

====  =====================  ======  =========  =========  =========== 
       Dingjialian Coal 
        Mine - Auxiliary 
 28     Shaft                  920      6.8        651         1.35 
====  =====================  ======  =========  =========  =========== 
       Xinzhuang Coal Mine 
 29     - Auxiliary Shaft      990      9.0        910         2.20 
====  =====================  ======  =========  =========  =========== 
       Shaozhai Coal Mine 
 30     - Main Shaft           866      5.5        744         1.55 
====  =====================  ======  =========  =========  =========== 
       Hongqingliang Coal 
        Mine - Auxiliary 
 31     Shaft                  465      9.5        404         1.40 
====  =====================  ======  =========  =========  =========== 
       Baijiahaizi Coal 
        Mine - Intake Air 
 32     Shaft                  679      6.8        715         1.50 
====  =====================  ======  =========  =========  =========== 
       Dahaize Coal Mine 
 33     - Auxiliary Shaft      661      10.0       678         2.35 
====  =====================  ======  =========  =========  =========== 
       Dahaize Coal Mine 
 34     - Return Air Shaft     669      8.0        686         1.90 
====  =====================  ======  =========  =========  =========== 
       Zhaoxian Coal Mine 
 35     - Return Air Shaft     564      6.0        514         1.10 
====  =====================  ======  =========  =========  =========== 
       Hongqinghe Coal Mine 
 36     - Auxiliary Shaft      730      8.0        694         2.20 
====  =====================  ======  =========  =========  =========== 
       Tangkou Coal Mine 
 37     - Intake Air Shaft    1,033     7.0        470         1.40 
====  =====================  ======  =========  =========  =========== 
       Tangkou Coal Mine 
 38     - Return Air Shaft    1,033     6.0        460         1.30 
====  =====================  ======  =========  =========  =========== 
 

To view a full copy of this announcement including all figures and illustrations, please see refer to the Company's website at www.pdz.com.au

This information is provided by RNS

The company news service from the London Stock Exchange

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November 02, 2016 03:00 ET (07:00 GMT)