 The supply of high quality raw coking coal is limited even in Shanxi Province. With its core coal processing facilities located in Liulin County, which is one of the richest coal reserve bases of high quality raw coal in China, Puda Coal enjoys a geographic advantage in gaining abundant, high quality resources at relatively lower costs. Currently, the Company has a total of 16 suppliers, including a preferred supply contract with Jucai Coal, a related supplier, and some other related and unrelated coal mines. Puda Coal's long-term supply arrangement with Jucai puts it in an advantageous position relative to other counterparts, as it is less likely to be affected by supply shortages caused by high demand and industry consolidation. In addition, the diversified raw material procurement strategy also enables Puda Coal to mitigate and manage the risk of supply shortages in the process of expanding its production capacity.
 In order to further solidify its position in the value chain, Puda Coal intends to enter the coal mining industry. In China, gross profit margins in the coal mining industry typically range from 40% to 60%, much higher than average gross margin of 17.0% in coal washing industry. Since Puda Coal's core facilities are located in Liulin, and given its abundant reserve of high grade raw coal, Liulin is an ideal location for Puda Coal to operate its own mining facilities. By establishing its own mining facilities, Puda Coal will have the opportunity to implement advanced coal mine technologies and management systems and achieve higher profit margins. Meanwhile, the Company is also actively evaluating other acquisition candidates and hope to gain more raw coal mines in the future.
The information contained herein includes forward-looking statements. These statements relate to future events or to our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. You should not place undue reliance on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could, and likely will, materially affect actual results, levels of activity, performance or achievements. Any forward-looking statement reflects our current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth strategy and liquidity. For example, our business strategies, such as our plan to acquire coal mines, are subject to, among other things, the risks and uncertainties relating to the market condition beyond our control. We assume no obligation to publicly update or revise these forward-looking statements for any reason, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. |
