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Puda Coal Enters Asset Transfer Agreement with Three Coal Mines in Shanxi Province

Puda Coal, Inc. (NYSE Amex: PUDA), a supplier of high grade metallurgical coking coal used to produce coke for steel manufacturing in China and a consolidator of twelve coal mines in Shanxi Province, today announced that Shanxi Puda Coal Group Co. Ltd, a 90% subsidiary of Puda Coal, entered into coal mining rights and mining assets transfer agreements with three coal mines located in Pinglu County, Shanxi Province, on December 28, 2010, Pinglu County Anrui Coal Industry Co., Ltd., Pinglu County Chuntouao Coal Mine and Pinglu County Xiapingcun Coal Mine.

On September 28, 2009, Shanxi Coal was approved by the Shanxi provincial government to consolidate certain coal reserves in Pinglu County, Yuncheng City, Shanxi Province ("Pinglu Project"). The assigned coal reserves are owned by eight coal mines with good operating track records prior to their mandatory shut down under the Shanxi province Coal Mine Consolidation Program and Xiapingcun Coal, a permanently closed small mine with a mining area of 0.7 square kilometers.

Pursuant to the agreements, Shanxi Coal will pay an aggregate purchase price of RMB 250,000,000 (approximately $37.43 million) for Anrui Coal, RMB 140,000,000 (approximately $20.96 million) for Chuntouao Coal, and RMB 61,200,000 (approximately $9.16 million) in cash, of which RMB 18,530,000 ($2.77 million) for Xiapingcun Coal.

Under each agreement, Shanxi Coal agrees to pay 50% of the purchase price within three days of signing, 40% of the purchase price within 30 days after assets transfer is completed and the mining permits and property deeds are transferred, and the remaining 10% of the purchase price six months after the mining permits and property deeds are transferred. Anrui Coal, Chuntouao Coal and Xiapingcun Coal will be responsible for canceling or terminating their respective employment contracts (or labor relationships) with their staff, paying all unpaid wage, premium and welfare expenses, and bearing all of the expenses caused by the cancellation or termination of the employment contracts.

Upon completion of the transfer of the mining rights and mining assets under the above agreements, Chuntouao Coal will be closed down and its underground coal reserves together with the reserves of Xiapingcun Coal will be consolidated into Anrui Coal. These coal reserves include higher quality thermal coal and coking coal.  

Shanxi Coal plans to place all the purchased assets of Anrui Coal, Chuntouao Coal and Xiapingcun Coal into Shanxi Pinglu Dajinhe Anrui Coal Industry Co., Ltd., a newly established project company. Dajinhe Anrui Coal is one of the three project companies set up by Shanxi Coal in connection with Phase II of the Pinglu Project. After consolidation and improvements, Dajinhe Anrui Coal's annual capacity will be 900,000 metric tons. The Company expects to complete the consolidation and restructuring within twelve months after the closing of the asset acquisitions.

Phase II of Pinglu Project will be co-developed by Shanxi Coal, Mr. Zhao Ming and Mr. Gao Jianping (the "co-developers") based on the Investment Cooperation Agreement signed on August 1, 2010. Under the Investment Cooperation Agreement, Shanxi Coal, Mr. Zhao and Mr. Gao will each contribute 40%, 30% and 30%, respectively, of the total investment needed for the consolidation and construction of Pinglu Project Phase II. The parties will share the profits based upon the above investment contribution percentages and bear the risks and losses in connection with the project which will be limited by the amount of investment contributed by each party. The co-developers authorized Shanxi Coal to control and manage Phase II of the Pinglu Project.

"We have now successfully acquired two coal mines of Phase I of the Pinglu Project, four coal mines under Phase II of the Pinglu Project and entered into definitive agreements to acquire the remaining coal mines under Phase II of Pinglu Project. In addition, we entered into an agreement to purchase the coal reserves and assets of Xiapingcun Coal, which will enable us to acquire all the coal reserves under the Pinglu Project. Our project team continues to make significant progress with the application process for construction permits and we look forward to commencing construction and restructuring," commented Mr. Liping Zhu, CEO of Puda Coal.


Puda Coal, Inc.

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