OREANDA-NEWS. January 19, 2015. SinoCoking Coal and Coke Chemical Industries, Inc. SCOK, -2.81% a vertically integrated producer of clean energy products located in Henan Province, announced it had entered into a three-party venture with Fangda Special Steel Technology Co. Ltd, China's largest automotive steel spring manufacturer, and with Henan Shenhuo Group, one of the six largest state-owned coal mining companies in Henan Province, whereby Fangda will provide SCOK with Letters of Guarantee on a monthly basis, issued to Henan Shenhuo, to guarantee payment for a minimum of 300,000 tons of coking coal in 2015.

Under terms of the multi-party agreement, SinoCoking will purchase clean, high-quality coking coal from Shenhuo at prices six percent below market. By providing the Letters of Guarantee, Fangda secures through SinoCoking its current supply needs for coking products, with SinoCoking expecting Fangda's supply requirements to increase up to 6 million tons over the next three years. Fangda will purchase a minimum of 240,000 of finished coke in 2015.

"We are delighted by this significant business development by which we and our primary coke supplier and major coke customer all benefit," said SinoCoking Chairman and CEO, Mr. Jianhua Lv. "These agreements will insure an uninterrupted supply of coking coal from Shenhuo Group and guaranteed sales to Fangda. At the same time it provides a mechanism that reduces SCOK's cash needs for purchasing raw materials and frees up more of our working capital and credit to invest in the build-out and expansion of our syngas production facilities."

Mr. Lv also noted that Shenhuo's production facility is located only 65 km from the company's Baofeng factory, and he expects this close proximity - relative to the locations of current suppliers - will generate additional savings due to lower transportation costs. "Combining better pricing on coal with this transportation benefit, we expect the cost of sales in our coking division to decrease by about 10 percent."

"Our three party cooperation with Shenhuo and SinoCoking," added Chen Wen, Purchasing Director of Fangda Group, "will provide us with high quality coke products on a consistent basis. It will ensure that Fangda's steel products continuously meet their production targets and quality standards, and at the same time will improve each partner's overall competitiveness."