It is reported that Atlantic Coal is to start due diligence on the 410 acre Pott & Bannon anthracite mining property in Pennsylvania after owner Reading Anthracite approved a lease option.

Atlantic will now pay USD 250,000 to RAC with a further US 250,000 to be held in escrow while it carries out due diligence on the property. If it takes up its option, Atlantic will pay USD 6 million in cash and shares for the property along with the grant of USD 3 million in warrants to RAC.

The Pott & Bannon property is situated in New Castle Township, Schuylkill County and about 25 miles from Atlantic existing open cast operation at Stockton. It is estimated to contain reserves of 12 million tons Run of Mine at 3.9 ratios with 4.1 million tons of clean coal.

Atlantic has appointed Mr John T Boyd & Company to carry out due diligence and confirm the resource information provided, adding it intends to submit the permit transfer application shortly.

Last week when the deal was announced, Atlantic managing director Mr Steve Best said that taking the lease option was part of its strategy to expand in Pennsylvania and to build Atlantic Coal into a major anthracite producer in the US.

Under the terms of the lease, RAC can buy all of the raw coal produced at the prospect until Atlantic makes a decision on whether to build a processing plant and up to 50% thereafter.

(Sourced from www.proactiveinvestors.co.uk)