The Chinese investors in Ugljevik are guaranteed raw materials for the next 18 years

Chinese investors who are expected to start building a 50 million Euro plasterboard factory in Ugljevik are not in a hurry. However, when they decide to begin production, they will have excellent conditions for work since they will receive guaranteed quantities of coal and gypsum for a period of 18 years through contracts with the Ugljevik Mine and Thermal Power Plant (RiTE).

The contracts that need to be confirmed by the shareholders’ assembly of RiTE Ugljevik with the company “BNBM Eastern Europe” from Ugljevik, which is 90 per cent owned by Chinese “BNBM”, commit RiTE Ugljevik to a continuous supply of raw materials.

More precisely, every year the factory will be able to count on 70,000 tons of coal and 250,000 tons of gypsum, which is produced as a byproduct of the desulfurization system. Otherwise, RiTE “Ugljevik” will pay penalties.

RiTE has committed by contract to deliver coal obtained from the mine. In case there is not enough for some reason, it will have to arrange on the market.

“In the event that the seller (RiTE) is unable to deliver coal to the buyer (BNBN Eastern Europe) from the excavation site, it can deliver substitute coal from alternative sources provided that such coal meets the requirements of the contract” is one of the provisions of the contract.

The parties have also agreed that the factory shall submit an annual plan of coal requirements for the following year by 30 September each year.

“However, the buyer may, at its own discretion and without assuming any responsibility towards the seller, order a smaller quantity of coal in a given year if its operational needs, associated with production, do not require the entire basic quantity in a particular year”, the contract states.

According to this agreement, the Chinese will have priority when it comes to supply.

Thus, their requests for raw materials will be fulfilled before anyone else's.

“The seller may conclude contracts for the sale of coal with third parties or begin supplying coal to third parties or other facilities only if this does not endanger the fulfilment of obligations under the contract”, the contract states.

Regarding the company “BNBM Eastern Europe”, their only obligation is to regularly pay for coal at a price of 45 euros per ton.

The ore will be transported by conveyor belts from the mine to the factory.

A similar situation exists with gypsum, which they will pay for at a price of one euro per ton.

In this case, as well, the factory as the buyer is guaranteed priority in supply.

“If the seller fails to deliver the agreed quantities of gypsum, in whole or in part, for reasons not attributable to force majeure or the buyer, the seller shall be obliged to pay a contractual penalty”, the draft contract states.

RiTE is obliged to always have gypsum reserves above the critical level, that is, more than 6,000 tons.

As a reminder, the management of RiTE Ugljevik signed a contract with BNBM in February last year to establish a joint venture, “BNBM Eastern Europe,” which launched a project to build a factory for the production of gypsum boards and gypsum products.

The main raw material would be gypsum from an expensive flue gas desulfurization system that is rarely used due to high operating costs.

However, to this day, not a single brick has been laid, although promises were made that the entire project would be completed by February next year.