Novadx to acquire Tennessee mine, prep plant from Justice

Novadx Ventures Corp. (TSX-V: NDX) said Oct 16 that it and Sandstorm Metals & Energy Ltd. have entered into a letter of intent to acquire certain coal properties and assets located in Campbell and Scott counties, Tenn., known as Mine 12, the Turley rail loadout and the Smokey Junction Preparation Plant, all in the vicinity of Novadx’s Rex No. 1 deep mine.

The Tennessee properties will be acquired from Premium Coal Co. and National Coal LLC, subsidiary companies of coal operator Jim Justice’s Justice Corp., for an aggregate purchase price of $8.5m.

The acquisition of these assets will facilitate a number of positive steps for Novadx. Mine 12, like Rex No. 1, is permitted to produce in the Rex seam and is contiguous with and will add significantly to the company’s existing Rex coal reserves. Mine 12 will provide a second mine entry into the high quality Rex coal seam, positioning the company for future expansion and maximized productivity and extended mine life, Novadx added.

The Smokey Junction prep plant will facilitate a more rapid start-up of mining operations at Rex No. 1. The Turley loadout brings improved market access, both domestic and export, to Novadx. The combination of incremental reserves with a mine permit at Mine 12, a wash plant and refuse facility at Smokey Junction, and control of a load-out facility at Turley, located on the Norfolk Southern railroad, positions the company for significant growth and improved market access, the company noted.

Newly-hired Novadx CEO Daniel Roling, who ran these properties in the past at National Coal, commented: “The Acquisition will greatly benefit the Company through the accretion of additional Rex coal at Mine 12, broadening our market access through the Turley Rail Load Out, and accelerating production at our Rex No. 1 mine by having immediate access to the nearby Smokey Junction Preparation Plant. Mine 12 is located about 5 miles from our Rex No. 1 mine, is fully permitted, is contiguous with, and ties into our existing property allowing us far greater flexibility in our future mine planning.”

The acquisition will be completed through a newly incorporated company (Newco) to be initially owned by Sandstorm and Novadx, based on their relative contribution to the purchase price. Novadx will have full control over management and operation of Newco. Sandstorm is a company that provides project financing in exchange for the right to sell coal from the operation.

The purchase price will be payable through a cash payment of $3m contributed by Sandstorm; $2m payable through the issuance of 4,377,675 common shares of Sandstorm; and a short term promissory note issued by Newco in the amount of $3.5m payable under certain circumstances.

Completion of the acquisition and related transactions remains subject to the approval of the TSX Venture Exchange.

Roling was the President and CEO of National Coal from August 2006 until it was sold in December 2010 to coal operator Jim Justice. Prior to serving at National Coal, Roling was First Vice President and Global Senior Metals and Mining Analyst at Merrill Lynch, where he was employed for 25 years.

Novadx is a Vancouver-based mining investment company. Through its wholly owned subsidiary, Novadx’s primary focus is to invest its capital to acquire and develop companies with active or near production high-quality coal reserves in Appalachia. MCoal Corp., a wholly-owned subsidiary of Novadx, operates the Rosa coal mine in Blount County, Ala., and is developing the Rex No.1 mine in Tennessee.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.