Forbes Coal signs major thermal coal supply deal with Vitol

Source: Forbes & Manhattan Coal Corp.

Forbes & Manhattan Coal Corp. (TSX:FMC) (Forbes Coal or the Company) has signed a three year supply agreement for 1.75 million tonnes (total) with Vitol S.A. (Vitol), a leading energy trading company. Vitol will be purchasing thermal coal from the Slater Coal properties at market prices.

Cash flow from this supply agreement will fund the continued ramping up of production at its two operating mines – Magdalena and Aviemore. The agreement is initially for three years and will support the previously announced production expansion plans. 

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Forbes Coal intends to transport the coal to the Navitrade Coal Terminal in Richards Bay using its increased rail transport and capacity with Transnet Freight Rail and Grindrod Terminals. Grindrod Terminals provides certain logistical, handling and stockpiling services to shippers in connection with the shipment of bulk cargoes. Grindrod Terminals shall provide Forbes Coal with export coal capacity in the Terminal of 600,000 metric tonnes in 2011, 720,000 metric tonnes in 2012 and 960,000 metric tonnes in 2013.

"This milestone for Forbes Coal will support our planned expansion into the coal export market. We have seen a steady increase in export prices over the past 12 months, driven by an increase in demand from India. Together with our increased export capacity at Richard's Bay, the Company is on track to establish itself as a mid-tier Southern African coal company." said Stephan Theron, President and Chief Executive Officer of Forbes Coal.

Based on Monday's closing prices, the deal could be valued at about $216.6 million. Thermal coal on the globalCOAL Newcastle index, a benchmark for Asia -- the biggest market for coal -- closed at $123.75 per tonne for the week to date, reports Reuters

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