Puda Coal Provides Update on Coal Mine Projects, Anticipates 2011 Coal Production of 849,000 MT

TAIYUAN, SHANXI PROVINCE, China, Jan.24, 2011/PRNewswire-Asia-FirstCall/ -- Puda Coal, Inc. (NYSE Amex: PUDA) ("Puda Coal" or the "Company"), a supplier of high grade metallurgical coking coal used to produce coke for steel manufacturing in China and consolidator of nine coal mines in Pinglu County Yuncheng City ("Pinglu Project") and four coking coal mines in Huozhou County Linfen City ("Jianhe Project") in Shanxi Province, today provided additional updates on the status of the Company's coal mine consolidation projects.

Background on coal mine consolidation

As previously disclosed, pursuant to the policy of the Shanxi provincial government, Shanxi Puda Coal Group Co. Inc. ("Shanxi Coal"), a 90% subsidiary of the Company, is approved by the government to acquire nine thermal coal mines in Pinglu County and consolidate them into five mines. The coal mines under the Pinglu Project have aggregated reserves of approximately 163.9 million metric tons (MT), based on government records, which were filed by original mine owners and will be expanded from pre-consolidation production capacity of 1.1 million MT to post-consolidation annual production capacity of 3.6 million MT.  Shanxi Coal also received the government's approval to acquire four metallurgical coal mines in Jianhe County and consolidate them into one large metallurgical mining operation.  The Jianhe project has total recoverable reserves of 23.7 million MT, based on government records filed by original mine owners, and annual production capacity will be expanded from 720,000 MT to 900,000 MT once consolidation is complete.

The coal mine consolidation process is administered by the government and has four stages, which can proceed in parallel, but the overall process is as follows: (1) Shanxi Coal purchases coal mine assets and mining rights of target coal mines; (2) the government reviews and approves all comprehensive pre-construction design reports on geology, preliminary construction design, safety and environmental protection prepared by Shanxi Coal; (3) Shanxi Coal engages in construction upgrades, technological enhancements and capacity expansion. Since the technological upgrades and capacity improvements are carried out on existing coal mines with good operating records, coal will be produced during the construction period but will be produced at a reduced level; and (4) the government inspects the construction quality, environmental and safety practices at the improved coal mines and issue operating licenses.

Pinglu Project Update

Pursuant to the government's approval, Shanxi Coal established five project coal companies to hold the mining assets of nine target coal mines and consolidate the nine coal mines into five mines. Shanxi Coal is developing the Pinglu Project in two phases: Phase I is being developed solely by Shanxi Coal; Phase II is co-developed by Shanxi Coal, Mr. Ming Zhao, Chairman and a significant shareholder of the Company and Mr. Jianping Gao, an unrelated party. For Phase II of Pinglu Project, Shanxi Coal is responsible for 40% of the total investment, Mr. Zhao is responsible for 30% and Mr. Gao is responsible for the remaining 30%. Shanxi Coal will control and manage both phases of Pinglu Project. The pre- and post- consolidation capacity of the coal mines are presented below:

* Indicate those mines that will be closed during the consolidation according to the construction plan of Shanxi Coal.  The coal reserves under the mines will be merged respectively to nearby upgraded coal mines and the historical production capacity of these coals is not calculated into the total historical capacity of 1,100,000 MT.

Under Phase I of the Pinglu Project, the government has approved the designed production expansion of Dajinhe Coal, which began construction on January 1, 2011. The Company estimates that Dajinhe Coal will produce approximately 150,000 to 290,000 MT of thermal coal during the construction period, which Shanxi Coal expects to be eight to twelve months. In addition, the government has approved the geological technical report and preliminary construction design of Dajinhe Wujin. Shanxi Coal's next step is to secure the government's approval to begin construction of the designed production expansion of Dajinhe Wujin.

Under Phase II of the Pinglu Project, Shanxi Coal has completed the acquisition of coal mining rights and assets of four coal mines: Xuhutuo Coal, Daqi Coal, Renling Coal and Donggou Coal. Shanxi Coal has also entered into coal mining rights and mining asset transfer agreements with the remaining three coal mines: Anrui Coal, Chuntouao Coal and Xiapingcun Coal. Shanxi Coal has paid approximately $34 million, representing 50% of the purchase prices, for the mining assets of the three remaining mines and expects the acquisitions to close in January 2011. Shanxi Coal has received approval on the geological technical report for project company Dajinhe Anrui and aims to receive construction approval for project companies Dajinhe Anrui and Dajinhe Jinyi by May 2011 and for Dajinhe Jinmen by July 2011.

The Company estimates that in fiscal year 2011 raw coal produced during the construction period of the Pinglu Project will be about 849,000 MT.

Jianhe Project Update

Pursuant to the government's approval, Shanxi Coal established a project coal company, Shanxi Huozhou Lituo Coal Industry Ltd ("Lituo Coal") to hold the mining assets of the four target coal mines upon acquisition and consolidate these mines into one.

Shanxi Coal will develop the mines under the Jianhe Project and intends to enter into mining asset purchase agreements with the four target coal mines by February 2011. Shanxi Coal has completed a geological technical report on Lituo Coal, which is currently being reviewed by the government and Shanxi Coal expects to receive construction approval by June 2011.  Shanxi Coal anticipates that it will take about eight to ten months to complete the construction upgrades and consolidation of the mines under the Jianhe Project after receiving construction approval.

Shanxi Coal plans to retain international geological prospecting firms to conduct geological technical prospecting on the reserves of the mines under the Pinglu Project and Jianhe Project based on international standards.  

About Puda Coal, Inc.

Puda Coal, through its subsidiaries, supplies premium high grade metallurgical coking coal used to produce coke for steel manufacturing in China. The Company currently possesses 3.5 million metric tons of annual coking coal capacity. The Company is in the process of adding coal mining operations to its business, as an acquirer and consolidator and acquirer of coal mines in Shanxi Province. On September 30, 2009, Shanxi Coal, a 90% indirect subsidiary of the Company, was appointed by the Shanxi provincial government as an acquirer and consolidator of eight thermal coal mines located Pinglu County in southern Shanxi Province. Shanxi Coal plans to consolidate the nine coal mines into five, increasing their total annual capacity from approximately 1.1 million to 3.6 million metric tons. Shanxi Coal received another approval by the Shanxi provincial government to consolidate four additional coking coal mines into one coal mine in Huozhou County. After the completion of the consolidation, the Jianhe project is expected to increase the total annual capacity from 720,000 metric tons to 900,000 metric tons, according to the Shanxi provincial government's approval. For more information, please visit http://www.pudacoalinc.com.  

FORWARD-LOOKING STATEMENTS

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 plan to acquire and consolidate coal mines and to complete different phases of coal mine consolidation within certain time frame, and the estimates with respect to the reserve and the production capacity are subject to, among other things, the risks and uncertainties relating to the market and geological condition, due diligence, negotiation for definitive agreements, etc. which are beyond our control, as well as our management's ability and capacity to execute our coal mine acquisition strategy and manage the coal mine operations. 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.

For more information, please contact:

SOURCE Puda Coal, Inc.

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