Celsius Coal has signed a non-binding Memorandum of Understanding (MoU) with Xinjiang Bayi Iron and Steel Group and China Minmetals Group. Both of these tier-one Chinese companies have operations in the province of Xinjiang, which neighbours the Kyrgyz Republic.
Commenting on the MoU, Celsius’ executive chairman Alexander Molyneux says, “The execution of this agreement demonstrates the strong Chinese customer interest in our coking coal. Bayi Steel is the major end-user for coking coal in Xinjiang and China Minmetals is a major importer and distributor of steel supply chain commodities to smaller end-users. Both companies are absolutely top-tier potential customers for our Uzgen Basin Coking Coal Project.”
Bayi Steel is the Xinjiang Division of Baosteel Group, China’s second largest and the world’s fourth largest steel maker. Bayi Steel is itself the largest producer of steel in Xinjiang and has a publicly stated target to increase its annual steelmaking capacity to 15 million tonnes in 2015.
China Minmetals is a Chinese Government key state-owned enterprise and a Fortune Global 500 company focused on all aspects of the metals and minerals supply-chain. It is the largest iron and steel trader in China and its Xinjiang division is a meaningful importer of steel supply chain materials.
The purpose of the MoU is to establish a working arrangement between Celsius, Bayi Steel and China Minmetals, to undertake preliminary investigations for the export, testing and supply of coking coal from Celsius’ projects in the Kyrgyz Republic. The commencement for the delivery of the trial shipments is yet to be agreed, but will occur no earlier than quarter 2 of 2014 and will expire on December 31, 2014.
The primary goal of the MoU is to facilitate the trial shipment of small parcels of coking coal, totalling up to 5000 tonnes, for metallurgical testing by the customers, resolution of transport methods and transport routes, and cross border transfer between the Kyrgyz Republic and China.
Upon successful completion of the primary goal, the MoU covers the potential for long-term supply and purchase arrangements of an estimated 500,000 tonnes of coking coal annually from 2015 to 2019 to be supplied by Celsius from its Kyrgyz Republic coal properties and shared at a to-be-agreed-upon allocation between Bayi Steel and China Minmetals. Pricing for deliveries beyond the trial stage will be subject to negotiation.