EX-99.1 2 ex99_1.htm MANAGEMENT PRESENTATION ex99_1.htm
 
SinoCoking Coal and Coke
Chemical Industries, Inc. (SCOK)
SinoCoking Coal and Coke Chemical
Industries, Inc. (SCOK)
Company Overview
February 2010
 
 

 
SinoCoking Coal and Coke
Chemical Industries, Inc. (SCOK)
Legal Disclaimer
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Included in this Presentation are forward-looking statements within the meaning of Section 27A of the Securities Act of
1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical facts, included in this Presentation that address activities, events or developments that we
expect or anticipate will or may occur in the future are forward-looking statements. The words "will," "should," "believe,"
"intend," "expect," "anticipate," "project," "estimate," "predict," "plan" and similar expressions are also intended to identify
forward-looking statements.
 These forward-looking statements include, but are not limited to, statements regarding:
  - estimates of proven probable and possible reserve quantities;
  - reserve potential;
  - business strategy;
  - acquisition opportunities;
  - estimates of future commodity prices;
  - amounts and types of capital expenditures and operating expenses;
  - expansion and growth of business and operations;
  - expansion and development trends of the coal industry;
  - production of coal reserves;
  - exploration prospects;
  - operating results and working capital; and
  - future methods and types of financing, including the financing described in this Presentation.
 
 

 
SinoCoking Coal and Coke
Chemical Industries, Inc. (SCOK)
Legal Disclaimer, continued. . .
3
Forward-looking statements involve assumptions and are subject to known and unknown risks and uncertainties that
could cause actual results or performance to differ materially from those expressed or implied by such forward-looking
statements. Although we believe that the assumptions reflected in forward-looking statements are reasonable, we can
give no assurance that such assumptions will prove to have been correct. You should also know that forward-looking
statements are not guaranties of future performance and are subject to risks, uncertainties and assumptions. These
factors include, but are not limited to risks described in detail in the section captioned “
Risk Factors“ as set forth in any
filings of SinoCoking with the Securities and Exchange Commission. Should any of these risks or uncertainties
materialize, or should any of the assumptions prove incorrect, actual results may differ materially from those included
within the forward-looking statements. SinoCoking undertakes no obligation to publicly release the result of any revision
to these forward-looking statements to reflect events or circumstances occurring after the date they are made or to
reflect the occurrence of unanticipated events.
Industry and Market Data
The industry and market data appearing in this presentation are inherently estimates and are based upon third-party
data, including information derived from SinoCoking’s own internal estimates. While SinoCoking believes that these
data are reasonable, in some cases this data are based on estimates of SinoCoking or others and cannot be verified by
SinoCoking. Accordingly, prospective investors are cautioned not to place undue reliance on the industry and market
data included in this Presentation.
 
 

 
SinoCoking Coal and Coke
Chemical Industries, Inc. (SCOK)
Legal Disclaimer, continued. . .
Financial Projections
The financial projections that appear in this Presentation are based upon the judgment of company management as of
the date hereof.  These estimates and projections are based on assumptions which the company believes are
reasonable as of the date hereof.  No assurances can be given, however, regarding the attainability of the projections or
the reliability of the assumptions on which they are based.  Certain of the assumptions used inevitably will not materialize
and unanticipated events will occur.  As a result, the actual results of the operations of the company will vary from the
projections and the variations may be material.  In addition, in preparing the projections, the company had limited
operating history on which to base its revenue and expense assumptions.  No independent auditors have examined,
compiled or reviewed these projections in any manner and, accordingly, no independent auditor expresses an opinion or
any other form of assurance on them.  This projected financial information was not prepared with a view toward
complying with published guidelines of the Securities and Exchange Commission or the guidelines established by the
American Institute of Certified Public Accountants regarding projections, nor is the projected financial information
intended to be presented in a manner consistent with financial statements prepared in accordance with generally
accepted accounting principles.
 
 

 
SinoCoking Coal and Coke
Chemical Industries, Inc. (SCOK)
Financial Snapshot
5
(1) PROJECTED for the fiscal year ending June 30, 2010.
(2) Reflects February 5, 2010 reverse acquisition and $7 million private placement.
 
 

 
SinoCoking Coal and Coke
Chemical Industries, Inc. (SCOK)
Company Overview
 SinoCoking is a vertically integrated producer and marketer of coal products, including coke, raw and
 washed coal, and chemical byproducts.
Coal Mine
 - Operates a coal mine located in Baofeng County, a
 part of Pingdingshan Prefecture south of the
 provincial capital of Zhengzhou
 - Mining rights to extract approximately 2.5 million tons
 of coal from Baofeng mine
Coal Washing Facility
 - Extracted coal is processed at SinoCoking’s coal-
 washing facility for washing and sorting
 - Washed coal is sold to customers as washed coal
 and portions of washed coal are used by SinoCoking
 to manufacture coke
Coking Facility
 - Produces and sells two types of coking coal
 (“coke”): metallurgical coke primarily used in steel
 manufacturing and chemical coke used mainly for
 synthesis gas production
Raw Coal
246,000
Coke
155,000
Washed Coal
244,000
Coal Tar
7,600
Coke
155,000
Raw Coal
73,000
Washed Coal
55,000
Coal Tar
7,600
Production and Sales (FY June 30, 2009)
6
 
 

 
SinoCoking Coal and Coke
Chemical Industries, Inc. (SCOK)
 1996 - Founding. Mr. Jianhua Lv leaves Henan Province Pingdingshan Coal Group to start Hongli using his own capital.
 § Trader / Distributor of coal products
 § Acquisition of coal washing facility
 2002 - Acquisition of the Baofeng Coking Factory. Hongli acquires the Baofeng Coking Factory to begin coke manufacturing.
 2007 - Establishment of Baofeng Hongchang Coal. Baofeng Hongchang Coal is organized as a subsidiary of Hongli to operate
 SinoCoking’s mining operations.
  2008 - Establishment of Top Favour Limited (BVI) Holding Company. Top Favour established as a British Virgin Islands
 holding company, which through its wholly owned subsidiary Pingdingshan Hongyuan Energy Science and Technology Development Co.,
 Ltd. (“Hongyuan”), controls Henan Pingdingshan Hongli Coal & Coke Co., Ltd. (“Hongli”).
 2009 - Establishment of WFOE. Hongyuan, a subsidiary of Top Favour is approved as a wholly-owned foreign entity.
 § Top Favour enters into a share exchange agreement with Ableacutions.com, Inc., a Florida corporation listed on the NYSE
 American Stock Exchange, whereby Top Favour will become a wholly owned subsidiary of Ableauctions.com Inc. in exchange for a
 majority of the equity ownership of the pro forma combined entity.
 § On December 30, 2009, the Ableauctions shareholders formally voted to approve the share exchange transaction.
 2010 - Completion of Going-Public Transaction and Initial Private Placement.
 § Completed reverse takeover with Ableauctions
 § Closed $7 million private placement financing with high net worth investors
 § Quotation of OTCBB under the symbol “SCOK”, pending application for listing on a national exchange
 § Pursuit of plans for construction of new coking facility
SinoCoking Corporate History
7
 
 

 
SinoCoking Coal and Coke
Chemical Industries, Inc. (SCOK)
Management Team - Officers
Name
Title
Age
Current & Previous Experience
Jianhua Lv
Founder,
CEO and
Chairman
41
 Executive Director and Chairman of Hongli since 1996, when he founded the company
 From 1989 to 1996 Mr. Lv held a number of positions at the Henan Province
 Pingdingshan Coal Group, where he has developed many years of experience in the
 coal and coking industries
 Standing committee member of the Chinese People’s Political Consultative Conference
 of Baofeng, Henan Province
Liuchang Yang
Director and
Vice
President
54
 Served as a Director of Hongli since 2003, and as its Vice Chairman since January
 2006
 Held various offices at the Company’s predecessors from 1983 to 2005, including
 secretary, deputy director, director and general manager of human resources
Zan (Sam) Wu
Chief
Financial
Officer
32
 Chief Financial Officer of Hongli since July 2009
 Chief representative of Global American, Inc. from 2006 - 2009
 Assistant manager and financial manager at Domino Scientific Equipment Ltd. from
 2004 - 2006
Hui Zheng
Vice
Manager of
Human
Resources
37
 Manager of Human Resources at Henan Province Pingdingshan Hongli Coal & Coke
 Co., Ltd. (SinoCoking) since 2006
8
 
 

 
SinoCoking Coal and Coke
Chemical Industries, Inc. (SCOK)
Management Team - Board of Directors
Name
Title
Age
Current & Previous Experience
Jianhua Lv
Founder, CEO
and Chairman
41
 Executive Director and Chairman of Hongli since 1996, when he founded the company
 From 1989 to 1996 Mr. Lv held a number of positions at the Henan Province Pingdingshan Coal Group,
 where he has developed many years of experience in the coal and coking industries
 Standing committee member of the Chinese People’s Political Consultative Conference of Baofeng, Henan
 Province
Liuchang Yang
Director and Vice
President
54
 Served as a Director of Hongli since 2003, and as its Vice Chairman since January 2006
 Held various offices at the Company’s predecessors from 1983 to 2005, including secretary, deputy
 director, director and general manager of human resources
Hui Zheng
Vice Manager of
Human
Resources
37
 Manager of Human Resources at Henan Province Pingdingshan Hongli Coal & Coke Co., Ltd. (SinoCoking)
 since 2006
Hui Huang
Director
42
 CEO of Wuhan Pingdingshan Coal and Wuhan Steel Unification Coking Company
 Served as Director of Sales and Administration, and as Director of the Economics and Technology
 Cooperation Center of the Pingdingshan Coal Group
 Vice-Director of the Henan Institute of Coal
Yushan Jiang
Director
55
 CEO of the Pingdingshan Coal Group Shoushan Coking Co., Ltd
 Served as the CEO of the Pingdingshan Coal Group Shoushan Coking Co., Ltd. since February 2007
 Vice-Director and member of the Coking Committee of the Henan Province Metals Association
 Vice-Secretary of the Henan Province Institute of Coal & Coke
Jin Yao
Director
61
 Vice-Chairman of the China Division of the Asia Pacific CEO Association
 Vice-Chairman of the China Division of the Asia Pacific CEO Association since 2003
 Served as General Manager at the Beijing Gaoping Technology Development Company from 1989 to 2003
Haoyi Zhang
Director
36
 CFO of Henan Pinggao Electricity Ltd. (Shanghai Stock Exchange: 600312), an A-share public company
 Served in Auditing and Finance positions for private and state-owned enterprises
 Designated to serve as audit committee chairman and audit committee financial expert
9
 
 

 
SinoCoking Coal and Coke
Chemical Industries, Inc. (SCOK)
Operational Overview -
Vertical Integration
Coal Mining and
Open Market
Purchases
Coal Washing and Processing
Coking
Process
Customers
10
 
 

 
SinoCoking Coal and Coke
Chemical Industries, Inc. (SCOK)
Company Operations - Coal Mining
 Extraction
 SinoCoking operates an underground coal mine
  Permitted to extract 2.5 million tons of coal from the Baofeng mine
  FY 2009, extracted 246,000 tons using the “room and pillar” method
  Coal extracted is bituminous coal
  Approximately 8% typically possesses properties that meet the
 requirements for coking coal
 The coal extracted from the mine generally has a sulfur content
 of less than 0.6% and energy content of 5,200-6,200 kcal/kg
 The extracted coal is transported to SinoCoking’s plant located
 two miles from the mine site and processed at the Company’s
 coal-washing facility
 Trading
 Given management’s expertise, the Company also engages in
 coal trading for profit.
  SinoCoking brokers coal from small independent mine operators in its
 surrounding areas
  If purchased coal meets requirements for coking, SinoCoking will
 generally use it to produce coke; otherwise, it holds and sells the coal
 when market conditions are favorable
11
 
 

 
SinoCoking Coal and Coke
Chemical Industries, Inc. (SCOK)
Company Operations - Coal Washing
Coal Washing and Processing
The coal washing facility at the current plant site is capable
of processing up to 750,000 tons of coal per year
Coal is washed through a water-based jig washing process
Sorting machines that can process up to 600 tons of coal per
hour sort the washed coal according to size
Approximately 1.33 - 1.38 tons of raw coal generally yields
one ton of washed coal
The bulk of the washed coal currently produced is reserved
for SinoCoking’s coking plant, although on occasion
SinoCoking will sell washed coal on the open market if prices
are favorable
Coal-washing process produces two byproducts:
  “Medium” coal, a PRC coal industry classification, is coal that
 does not have sufficient thermal value for coking, and is mixed
 with raw coal and even coal slurries, and sold for home and
 industrial heating purposes; and
  Coal slurries are the castoffs and debris from the washing
 process. Coal slurries can be used as a fuel with low thermal
 value, and are sold “as is” or mixed with “medium” coal
12
 
 

 
SinoCoking Coal and Coke
Chemical Industries, Inc. (SCOK)
Company Operations -
Coke Manufacturing; Current Facility
Current Coking Facility
  The Company produces two type of coke: metallurgical coke and chemical coke
  SinoCoking’s metallurgical coke has typical characteristics of 85% fixed carbon, less than
 12% ash, less than 1.9% volatile matter and less than 0.7% sulfur
  The Company’s chemical coke has typical characteristics of more than 80% fixed carbon,
 less than 18% ash, less than 3% volatile matter and less than 0.8% sulfur
  Coke is produced onsite from a series of three parallel WG-86 Type coke ovens
  An annual capacity of 250,000 tons
13
 
 

 
SinoCoking Coal and Coke
Chemical Industries, Inc. (SCOK)
Company Operations -
Coke Manufacturing; Planned New Facility
New Coking Facility (projections)
  Plans to complete construction and start production by the first calendar quarter of 2011, assuming
 sufficient capital for construction (approximately $65 million in incremental capital) available by March
 2010
  Expected theoretical production capacity of 900,000 tons of coke per year; practical capacity of
 850,000 tons
  New coking factory will be equipped with new technologies that make it capable of processing
 inferior washed coal (with G-index as low as 50) that can be acquired from third-parties
  New factory will produce other coal byproducts including crude benzol, sulfur and ammonium sulfate
 
 

 
SinoCoking Coal and Coke
Chemical Industries, Inc. (SCOK)
Sales & Marketing
Product
Distribution
Coke
 Sold to distributors and the state-owned trading company Wu Han Tie Ying Trading Corporation
 Non-binding annual letters of intent that set forth current year supply quantities, suggested pricing, and monthly
 delivery schedules.
Raw Coal
 Primarily sold to distributors who then resell to power plants
 Per purchase order basis; payment on delivery or prepay
Washed Coal
 Primarily sold to a trading company who then resells to Wu Han Tie Ying Trading Corporation
Coal Tar
 Sold to traders who resell to end users
 Pre-purchase order basis; payment on delivery or prepay
Coal Gas
 SinoCoking plans to sell the coal gas from the new coking factory to power generation companies
Coal byproducts sales
 Sold to trading companies who resell to end users
Customers
Four customers collectively accounted for 65 percent of SinoCoking’s total revenue in fiscal year 2009
  Wu Han Tie Ying Trade Ltd, 29% of total sales
  Hu Nan Lou Di Zhong Yuan Trade Ltd, 13% of total sales
  Wu Han Zheng Tong Industrial Trade Ltd, 12% of total sales
  Heng Yang Shi Guan Xiang Material Ltd, 11% of total sales
15
Product Distribution
 
 

 
SinoCoking Coal and Coke
Chemical Industries, Inc. (SCOK)
Growth Strategy
Current coking customer demand significantly exceeds SinoCoking’s current production capacity.
SinoCoking plans to build a new state-of-the-art coking facility to expand production and widen its product line, which if
 completed as planned, would increase coke production capacity from 350,000 tons to an estimated 1,200,000 tons
 per year.
New Facility - Projected Timeline
  Broke ground on this project recently and is using its internal resources to fund its initial development
  In summer 2009, SinoCoking ordered capital equipment with prepayment of USD $4.4 million
  Plans to acquire zoned land use rights for USD $22 million
  Spring 2010 - plans to commence construction of facility
  Facility expected to begin production in Q1 2011 (1)
New facility would allow SinoCoking the opportunity to expand into other coal-related products including:
  Crude benzol
  Sulfur
  Ammonium sulfate
  Increase coal tar production
SinoCoking plans to continue to integrate vertically to improve margins
(1) Contingent on financing.
16
 
 

 
SinoCoking Coal and Coke
Chemical Industries, Inc. (SCOK)
Macroeconomic Drivers
Chinese economy expected to grow at 9% annually next 5 years
  Economy has grown over 10% annually over the last thirty years
  Hundreds of millions of Chinese creating a newly emergent middle class expected to drive consumption in the next
 decade
Steel demand in China expected to grow at 10% annually next 5 years
  Expected Chinese steel production of 600 million metric tons in 2016 (1)
  Continued investment in construction, infrastructure, and growing automobile demand will underpin steel demand
Demand for coke should follow steel demand growth
  Metallurgical coke is a major input into the steel production process
  Estimated consumption of coke per year in China is approximately 4.5 billion tons
  China is the largest producer and consumer of coking coal in the world
Possible coke supply shortage from government leading consolidation of small sized mines
  Provincial governments, notably in Shanxi and Henan, are promoting consolidation of smaller mines
  Larger operators are expected to be more efficient, environmentally responsible, and safety conscious
(1) Wall Street Journal as of 1/11/2010.
17
 
 

 
SinoCoking Coal and Coke
Chemical Industries, Inc. (SCOK)
Company Specific Drivers
 Experienced Leadership
 § Mr. Lv successfully bootstrapped his coal mining business, taking an underperforming company and creating a vertically-
 integrated, profitable regional player that is well-regarded by the local and provincial governments
 § Despite the challenging economic environment, SinoCoking remained profitable in 2009 and is well-positioned for 2010
 § Capital will allow the Company to build a new facility, diversify its product mix, use lower quality coal as an input in the
 coke manufacturing process, and improve its margins
 Consolidation
 § Provincial government is planning on reducing total mines in the Pingdingshan area to 40 from 140
 § Provinces interested in building vertically integrated mid-size coal companies
 § SinoCoking is being positioned by the government as a leading provincial coal mine consolidator, and expects to be
 officially designated by the Henan provincial authorities as a consolidator in 2010
 § SinoCoking’s proposed new coking facility declared “important economic goal of 2010” by Henan provincial officials
 § Projections assume future input washed coal is purchased from third parties; acquisitions can further catalyze margin
 expansion
 Scalable Business Model
 § Vertical integration allows for profitable expansion
 § Scale creates more opportunity for acquisitions and an increased ability to access capital.
 Competition has limited access to capital (no comparable-sized entity in the U.S. or Asian capital markets)
18
 
 

 
SinoCoking Coal and Coke
Chemical Industries, Inc. (SCOK)
19
Financial Review
 
 
 
 

 
SinoCoking Coal and Coke
Chemical Industries, Inc. (SCOK)
Revenues and EBITDA
Revenues: 2006A - 2010E
EBITDA: 2006A - 2010E
($ in 000’s)
* The Company’s fiscal year ends June 30.
 § SinoCoking acquired its coking factory from the Baofeng County Coking Factory, a state-owned enterprise, in
 2005
 § Since that time, SinoCoking ramped up its coke production through a series of equipment improvements and
 upgrades
 § Revenues increased from $11 million for the year ended June 30, 2006 to $30 million for the year ended June 30,
 2007, representing an increase of 172%
 § In 2008, revenues increased 95% compared to 2007, resulting from rapidly rising market prices for coal and coke
 § Revenues decreased slightly in 2009 caused primarily by a decline in market prices for coke and softening
 demand for coke by steel producers, offset by increases in raw and washed coal prices
20
 
 

 
SinoCoking Coal and Coke
Chemical Industries, Inc. (SCOK)
GAAP Income Statements
($ in 000’s)
21
 
 

 
SinoCoking Coal and Coke
Chemical Industries, Inc. (SCOK)
Historical Revenue Breakdown
Raw Coal   Washed Coal  Coke  Coal Tar
 SinoCoking Optimizes Product Mix for Profit Potential
 § 2008 saw record coke prices
 § 2009 price reversion - management responded by selling less coke and finding profit opportunities in supply /
 trading of new washed coal
22
 
 

 
SinoCoking Coal and Coke
Chemical Industries, Inc. (SCOK)
Historical Volumes and
Pricing: Raw Coal
Raw Coal
 
 

 
SinoCoking Coal and Coke
Chemical Industries, Inc. (SCOK)
Historical Volumes and
Pricing: Washed Coal
Washed Coal
 
 

 
SinoCoking Coal and Coke
Chemical Industries, Inc. (SCOK)
Historical Volumes and
Pricing: Coke
Coke
25
 
 

 
SinoCoking Coal and Coke
Chemical Industries, Inc. (SCOK)
Selected Balance Sheet Items
Capital Structure
($ in 000’s)
Note: Contingent on an equity financing.
* SinoCoking has received approval for a project loan from a local bank in Pingdingshan in the amount of RMB 300 million ($USD 44 million)
26
 
 

 
SinoCoking Coal and Coke
Chemical Industries, Inc. (SCOK)
Capital Structure:
Share Holdings as of February 5, 2010 After Private Placement
Capitalization at 2/5/2010
27
Shareholder
Common Shares
Held
Percentage of
Outstanding
Shares
Honour Express Limited, a BVI Company (1)
 6,694,091
43.60%
Liuchang Yang
 574,566
3.74%
Ruiyun Li
 913,009
5.95%
Other SinoCoking Shareholders
 4,936,285
32.15%
Subtotal:
 13,117,952
85.45%
Public Shareholders
 409,710
2.67%
Existing Options and Warrants
 53,241
0.35%
Private Placement Investors 2/5/2010
 1,180,892
7.69%
Investor Warrants Issued 2/5/2010
 590,446
3.85%
Subtotal:
 2,234,289
14.55%
TOTAL:
 15,352,240
100%
(1) Mr. Lv is a director and beneficiary of Honour Express
Limited.