NewLead Holdings says it failed to complete the acquisition of a coal mine in Kentucky during 2013. The statement comes just days before its CEO Michael Zolotas is to be deposed in the New York Supreme Court in a case in which NewLead’s coal mining activities have come under scrutiny.
The company expected to finalise the deal for the Marrowbone mine in Cumberland County during the third quarter of 2013.
NewLead had previously disclosed the deal in its Annual Report on Form 20-F for its fiscal year 2013, filed May 2014, alongside the disclaimer that there was “no assurance that the ongoing discussions following the expiration of the exclusivity period for the acquisition of the Marrowbone mine would result in agreement for the acquisition of such mine or if such agreement was reached, whether the company would be able to finance any such acquisition”.
NewLead said in a statement that the deal failed “due to a number of factors including a failure of the parties to reach acceptable definitive terms for such acquisition, the collapse of coal prices, as well as adverse coal market conditions, especially with regard to the export and transportation of coal that continues today”.
Michael Zolotas will be deposed in court on September 30 and October 1. His co-defendant Jan Berkowitz will be deposed in Philadelphia on October 14-15, and the plaintiff Serge Turko will be deposed in New York on October 19-20.
Turko’s commodity trading company TransAsia is suing the defendants, NewLead Holdings and its coal mining subsidiary NewLead JMEG for $6.2m in compensation over a failed agreement to buy 110,000 tonnes of coal from Kentucky’s Five Mile Mine, which was never delivered to the buyer. Splash has covered the case extensively.
NewLead JMEG filed a stipulation of liability for breach of contract to the Supreme Court of the County of New York in July, and withdrew its two counterclaims against TransAsia. The stipulation concerns count 1 of TransAsia’s complaint, the failure to deliver the coal purchased. The complaint was filed to the court in December 2013.
The other three counts in the plaintiff’s complaint accuse the defendants of deliberately making misrepresentations about their ownership of coal mining assets and ability to fulfil sales contracts.
In its complaint, the plaintiff claims the defendants made these misrepresentations in order to inflate NewLead Holdings’ share price and prevent it being delisted from the NASDAQ stock exchange, and to obtain credit from banks. The defendants have denied these allegations in full.
In court on April 13, TransAsia’s attorneys accused the defendants of altering a sales contract and forging TransAsia’s principal’s signature on the new document, according to the court transcript obtained by Splash.
The plaintiff says it conducted due diligence before signing off the deal by visiting the coal mine. The trader, which is now in receivership, stated NewLead JMEG had said it owned the Five Mile Mine, which the defendants deny.