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Prairie Mining takes legal action to secure major Polish coking coal project #PDZ

Shares in Prairie Mining (LSE:PDZ) fell today after the firm said it had taken legal action against Poland’s Ministry of Environment to protect the security of tenure over its Jan Karski coking coal project. In July 2015, Prairie secured the exclusive right to apply for a mining concession at Jan Karski, subject to receiving approval for development plans and securing an environmental consent decision by 2 April 2018. Due to a delay in an environmental consent decision being issued, Prairie has been unable to apply for Jan Karski’s mining concession within its exclusive deadline.

Under the terms of its exclusive right, Prairie was granted the legal ability to apply for a ‘mining usufruct agreement’ for an additional 12-month period of exclusivity beyond April 2018. The firm applied for this agreement in December last year and, under Polish law, the Ministry of Environment (MoE) is obligated to grant the extension within three months of application.

The MoE has not yet granted the extension to Prairie, and, as a result, the firm has begun legal proceedings against the government body to protect its security of tenure over Jan Karski. According to Prairie, the MoE has breached its obligations, which means the Polish civil court has the power to enforce the extension of the firm’s exclusive right to apply for a mining concession.

However, the firm added that if an extension is not made available on acceptable terms or for any other reason, then other companies may be able to apply for a concession over all or part of Jan Karski. Prairie assured investors that no one would be able to apply for a licence until legal proceedings have concluded. But it is likely fears the firm will lose the licence are what have led shares to fall by 28.6pc, or 13.1p, to 32.7p today, as at the time of writing.

The company added: ‘Prairie has always conducted its business in Poland in accordance with the Polish law and continues to pioneer the application of international standards for development and feasibility work in Poland necessary to ensure the value of its Tier One coking coal projects are maximised for all stakeholders, meet the rigorous requirements for international financing and can ensure the production of high-quality coking coal product to regional European steelmakers.’

Jan Karski is a large scale semi-soft coking coal project located in the Lublin Coal Basin in south-east Poland. It is situated adjacent to the Bogdanka coal mine which has been in commercial production since 1982 and is the lowest cost hard coal producer in Europe. According to Prairie, Jan Karski has the potential to produce a high-value ultra-low ash semi-soft coking coal with a coking coal product split of up to 75pc.

Prairie’s other coal project is the Debiensko Mine, a hard-coking coal project located in the Upper Silesian Coal Basin in the south west of the Republic of Poland.

Author: Daniel Flynn

Disclosure: The author of this piece does not own shares in the company mentioned

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