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Chairman's Message

SEATTLE, Aug. 15, 2012 /PRNewswire/ -- To our fellow shareholders,

L&L Energy is well-positioned for growth in the coming year, and we have very attractive opportunities created by the dynamic marketplace in China. I am excited about the future of our Company and believe the anticipated growth will result in significant shareholder value improvement.

Positioned for Growth

Despite setbacks in the first three quarters of the fiscal year, we have successfully enhanced our operations and recruited great talent, while continuing to report solid net earnings.

Improved Mine Portfolio – We have been upgrading our portfolio of mines to reflect the new realities of China's regulatory environment. Our acquisition of the Weishe mine is a great reflection of our strategy moving forward. Rather than focusing on smaller, inefficient mines like Ping Yi, which we divested during the fourth quarter, we are now pursuing larger and better-designed mines that meet and exceed the new safety and production regulations. This strategy will allow us to reduce capital expenditures while ramping production more rapidly.

Strengthened Team – In the last year, we were fortunate to add two outstanding coal experts to our board: Dr. Syd Peng and Jingcai Yang. Syd, a distinguished professor of underground mine engineering at West Virginia University, and Jingcai, a former senior executive of Shenhua Group, the world's largest coal company, bring important new depth to our board as we enter our next phase of expansion.

We have also made great progress at strengthening our team on the ground in China, including the hiring of key leaders such as Xie Zhi, a former executive from AVIC International Logistics and Guizhou Railroad Holdings with over 25 years of local experience in institutional coal sales. We've also recruited more managers with MBA degrees as the backbone of our China operations, aligned job descriptions, updated pay scales, and greatly improved staff morale.

Maintained Profitability – While government-mandated idling and shutdowns of mines throughout our operating region impacted production during the first three quarters of fiscal 2012, we maintained profitability for the year thanks to effective cost-cutting measures and the hard work and dedication of our team. Our fourth quarter performance showed marked improvement, and we are confident our mines are now on their way to producing at their government-approved levels. With strong margins in our mining segment, expected increases in production will further contribute to our overall profitability moving forward.

Opportunities Ahead

I believe there are four key opportunities that will drive our growth in the year ahead: continued progress of our consolidation efforts in Guizhou, expansion of our wholesaling operations, ongoing strengthening of our team, and diversification of our operations.

With encouragement from provincial leaders in Guizhou, we remain focused on capitalizing on the consolidation opportunities in the province. We've been able to differentiate L&L from local operators by using our American-style analytical skills and problem solving attitude. Together with our track record of successful integration, we've gained a solid competitive advantage over our competition. We intend to complete the acquisition of both the Louzhou and Lashu mines this year. Both mines fit well with our current strategy of acquiring more modern mine operations that require lower capital expenditures and already meet and exceed safety and production regulations. Weishe, Louzhou and Lashu, all developed by Union Energy, will be able to produce 1.35 million tons per year when they reach their full production capacities.

We are very excited about the expansion of our wholesale and distribution business. The big steps we have already taken have resulted in our gaining major customers such as Datang International. While we've already proven our ability to deliver coal at the right time, to the right place, and with the right quality; new strategic partnerships with companies like AVIC Sichuan Coal Logistics will ensure we can enhance our logistics infrastructure and access coal supplies, allowing us to grow our wholesale network, and driving increased revenue and profitability for L&L. These partnerships are also valuable as we explore new markets throughout southwestern China.

To execute our plans effectively, we continue to build a great team. In the year ahead you will see more effort to recruit talent at all levels of our organization, especially on the ground in China. I am pleased that Y.P. Chan has recently joined L&L as Managing Director of Mergers & Acquisitions. He has a strong track record of success in both the U.S. and China, including public company experience. I am also pleased with the addition of Jim Schaeffer and Mohan Datwani, Esq. to our advisory board. Jim, a former CEO of a publicly listed coal company, has over 25 years of Asian business experience and holds a degree in Mining Engineering from the University of Pittsburgh. Mohan, a former partner at the LA-based law firm of Paul, Hastings, Janofsky, & Walker and a proposed new board member for L&L, also brings extensive legal and corporate finance experience, as well as coal industry experience to our organization.

Another area we are dedicated to focusing on for fiscal 2013 will be the diversification of our operations and de-risking of key assets. We intend to explore the possibility of expanding into other provinces like Inner Mongolia, and will evaluate opportunities in surface mining, clean coal technology, and port development. Additionally we plan to continue upgrading current operations by assessing the divesture of less efficient mines and facilities, such as our ZoneLin coking operation. By divesting inefficient operations we can focus our capital expenditures on newly built and better-designed facilities, resulting in a more rapid expansion of both revenues and profits.

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