INDUSTRY - Songzai International Holding Group Inc., an Industry-based leader in coal production and exploration in China, has entered into an agreement to acquire the Liujiaqu Coal Mine in the Inner Mongolia region.

With estimated coal resources of about 143 million metric tons, the mine would produce about 1.2 million metric tons in 2011, with "continuous growth thereafter," the company said Monday.

Completion of the proposed acquisition is subject to a variety of factors, including completion of due diligence, regulatory approvals and the consummation of financing conditions by the company.

If all goes as planned, Songzai expects production at Liujiaqu to be under way by the third quarter of 2010.

The extracted coal will be sold for power generation, cement factories and other industrial uses, as well as for home heating uses.

"All of our major customers are located in northeastern China, primarily in the provinces of Heilongjiang and Jilin," said Richard Hull, a representative with the investor relations firm, American Capital Ventures. "Coal is transported to these customers principally by railways."

Last year, Songzai delivered about 1.3 million tons of raw coal to customers via railways, down from about 1.8 million tons in 2008, according to Hull.

Songzai also has mining rights to the Tong Gong Coal Mine in Northeastern China. At that site, the company employs "longwall mining," a technique in which a long wall of coal is mined in a single slice.

Songzai reported net income of more than $2.1 million, or 14 cents per share, for the quarter ended March 31, 2010, down from a profit of more than $10 million, or 65 cents per share, for the same period a year earlier.

The company's assets for the first three months of 2010 were $93.4 million compared with $90 million a year earlier.

Songzai does not own the land from which the coal is extracted. But it has mining rights to extract a capped amount of coal from a mine as determined by government-authorized mining engineers and approved by the Heilongjiang Department of Land and Resources.

The company's business currently includes mining operations at Tong Gong and the Xing coal mines in northern China.

Songzai's over-the-counter stock (SGZH.OB) closed up 80 cents Monday to $5.50 per share.