On January 1, 2012 the Company entered into a contract to supply coal to Indianapolis Power and Light (IP&L) at a fixed price for three years. Terms of the contract dictated certain quantity delivery requirements well as possible pricing adustments due to seller’s compliance costs and/or the BTU content of the coal.
Because the mine is still in process of being completed and ramping up to full production, subsequent amendments to the original contract have been agreed to whereby the original supply requirement to IP&L over the course of the contract has been reduced.
As per the current contract requirements the Company is obligated to provide coal at the following rates for the next three years:
Calendar Year
Annual Quantity
2013
180,000 tons
2014
300,000 tons
2015(the extended term if applicable)
200,000 tons
The Company has a Performance Bond with the Argonaut Insurance Company relating to the coal supply contract with IP&L. The performance bond reimburses IPL for the cost of having to procure coal at a higher price than contracted with the Company. The bond reimburses IP&L for the difference in price between the contract price the Company is obligated to supply coal at and a potentially higher price if the Company cannot supply the required coal.
The Company has no other contracts to sell coal at the present time however the Company is in discussions with a number of other potential coal customers here in the United States as well as other locations internationally.
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