SinoCoking Coal and Coke Chemical Industries, Inc. (NASDAQ:SCOK) (the “company” or “SinoCoking”) today announced that it broke ground today on the construction of its new state-of-the-art coking facility in Pingdingshan city, in Henan Province, China. The new coking facility, which will cost an estimated $70 million to complete, is expected to launch production of metallurgical and chemical coke, coal gas, and various chemical products by early 2011. The cleaner, more efficient coking facility will have an anticipated maximum annual production capacity of 900,000 metric tons of coke. SinoCoking management projects that if completed as planned, the launch of the new facility could result in a five-fold or more increase in the company’s annual coke production and sales volume from the fiscal year 2012 and beyond, compared to current levels.
SinoCoking presently relies on its three parallel WG-86 type coke ovens, which have certain technical limitations. SinoCoking’s current facilities have a production capacity of up to 250,000 metric tons per year.
The new coking facility will be capable of utilizing a broader range of coal inputs compared to the company’s existing plant, with even lower thermal properties (a G-index as low as 50). Since the average cost of inputs will decrease, this is expected to enable SinoCoking to produce coke at a better profit margin. The new facility is also expected to generate an additional 66.5 million Kilowatt hours of electricity each year from the conversion of heat emitted from the coal-gas powered system, which is used to power steam generators. The new facility will also produce purified coal gas as a fuel source for use by city residents. These two byproducts alone could result in an additional estimated $43 to $62 million in projected incremental revenue per year for SinoCoking, based on current energy prices and currency translation rates. The company’s plans to provide coal gas to local residents have received approval from the city of Daying, which will involve providing coal gas to consumers at a price per thermal equivalent unit that is 20% less than the current price of liquid natural gas (LNG), a competing alternative. In addition, SinoCoking anticipates that the new coking facility will expand its product portfolio, enabling it to offer its customers other products such as crude benzol, sulfur, and ammonium sulfate.
“We view this as a key step in the implementation of our growth strategy,” said Jianhua Lv, Chairman and Chief Executive Officer of SinoCoking. “Power and fuel scarcity, as well as environmental side effects of industrial growth, are key issues in China today. Our new coking facility project helps to address these issues, and that is why our project is strongly supported by our local and provincial governments. Furthermore, the completion of this project would enable us to produce our coke products with even greater efficiency, and will provide expanded revenue opportunities to SinoCoking. We look forward to the completion of this project, to further solidify our leadership position in the regional market.”
SinoCoking is a supplier of the vital commodities of thermal and metallurgical coal and coke to industrial users such as power plants, steel mills, plant and factory operators and manufacturers in China. The Company is a vertically-integrated processor that uses coal from both its own mines and that of third-party mines to provide basic and value-added coal products to its customer base. SinoCoking began producing metallurgical coke in 2002, and since then has expanded its production to become an important supplier to regional steel producers in central China.