L&L Energy Inc (LLEN)

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L&L Energy, Inc. (LLEN)

F2Q 2013 Results Earnings Call

December, 11, 2012 12:00 PM ET

Executives

Ian Robinson - Chief Financial Officer

Clayton Fong - Vice President, U.S. Operations

Analysts

David Sheridan - Boenning & Scattergood

Don Sinsabaugh - Fulcrum Securities

Walter Ramsey - Walrus Partners

Presentation

Operator

Good day, ladies and gentlemen and thank you for standing by and welcome to the L&L Energy Incorporated Second Quarter Fiscal 2013 Earnings Conference Call. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session toward the end of the conference. (Operator Instructions)

As a reminder this conference is being recorded for replay purposes. With me today is L&L's Chief Financial Officer, Ian Robinson; and Vice President of U.S. Operations and member of the company Board of Directors Clayton Fong.

Before I turn the call over to Mr. Fong, may I remind our listeners that this call management's prepared remarks contain forward-looking statements, which are subject to risks and uncertainties and management may make additional forward-looking statements in response to your questions.

Information regarding forward-looking statements except historical facts contained herein are pursuant of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks, as well as uncertainties, which may cause actual results in future periods to differ materially from forecasted results. Actual results may differ from those discussed today, and therefore we refer to you more detailed discussion in the risks and uncertainties in the company's filing with the Securities and Exchange Commission.

And now it's my pleasure to turn the call over to L&L's Vice President and the director, Clayton Fong. Mr. Fong, please go ahead.

Clayton Fong

Thank you operator, and good morning to everyone. I'd like to welcome you to our second quarter earnings call. We're pleased today to share with you our financial results for the quarter and the discussion of our recent development. This quarter one was definitely one of continued growth. We've seen four count of - four consecutive quarters of increased mining productions, net income, and earnings per share. Our mining production for the second quarter was a company record and mining is the primary driver of our earnings. Going forward we expect continued improvement in mining.

On November 18, we completed the acquisition of two additional new mines Guizhou, which added $34 million tons of coal reserves and when fully expanded 750,000 tons of annual coal production. Both mines produce low sulfur, high BTU, anthracite coal. The first mine, LuoZhou, has 27 million tons of reserves and in accordance with the newly adopted mining standard set by the government has completed its trial production. It is anticipated to reproduce at an initial rate of around 200,000 tons, ramping up to its approved rate of 300,000 tons per year over the subsequent months. LuoZhou is targeted to expand to 450,000 tons by the end of 2013.

The second mine LaShu is producing development coal right now and should start trial production early next year. We expected to hit 150,000 tons per year this coming fiscal year and expected to eventually ramp up to its approved rate of 300,000 tons. LuoZhou and LaShu along with Weishe, an acquisition earlier this year, will eventually be organically expanded to produce in aggregate over $1.2 million tons of coal annually. All three of these mines are located in the same proximity, which allows us to benefit from operational efficiency.

We are very pleased with our partnership with Union Energy, the impact of these three mines greatly will expand L&L's mining segment and ultimately shareholder value. As consideration for LuoZhou in LaShu, L&L agreed to swap our DaPing Coal Mine and Zonelin Coking facility with Union Energy. The asset swap should affect earnings and EPS positively in the short term with substantial upside as we organically expand and grow both LuoZhou and LaShu. While mining expansion should help a bottom line expansion of our wholesale segment should substantially increase a top line.

In October, we inked a new contract with Datang Power, one of second largest energy producers to provide 360,000 tons of coal. In September, we absorbed a local sales company to expand a wholesale capacity in Yunnan. GuangYeh was rolled under the L&L Tai Fung subsidiary and is expected to substantially grow a sales over the next year. We also signed an MoU with Taggart Engineering, Beijing to develop substantial coal washing and other wholesale infrastructure.

With that I'd like to turn the call over to our Chief Financial Officer, Ian Robinson, who'll give details of our fiscal quarter financial results.

Ian Robinson

Thank you, Clayton and good morning everybody. We are pleased to report another quarter of solid profitability and growth. Our production of 185,000 tons represents year-over-year growth of 96% and a quarter-on-quarter increase of 24% from the first quarter. Our revenue for the second quarter was $54.9 million with mining contributing $18.9 million, washing contributing $21.6 million, wholesale contributing $10.1 million and coking contributing $4.3 million.

Revenues increased 27% year-over-year to $54.9 million. On quarter-on-quarter basis revenues increased 21% from was $45.3 million last quarter. Wholesale revenues increased 100% year-over-year to $10.1 million.

Net income attributable to L&L increased 104% year-over-year to $7.7 million for the second quarter and increased quarter-over-quarter 24% from $6.2 million last quarter. Earnings per share for the quarter was 21% an increase of 90% compared with the same period last year and an increase of 24% quarter-over-quarter. I'd like to now hand it back to Clayton for a few closing remarks.

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