IchorCoal has acquired a 29.99% stake in Universal Coal, in exchange forAU$ 24.5 million.
The funding will complete the financing for Universal Coal’s acquisition of the New Clydesdale coal mine and will also partly fund the development of the combined New Clydesdale/Roodekop complex.
The transaction must first be approved by Universal Coal’s shareholders, which should be finalised at a general meeting due to be scheduled imminently.
"This Transaction provides IchorCoal with considerable scope to grow its existing attributable ~350 million mineable t resource,” said Nonkululeko Nyembezi-Heita, CEO of IchorCoal.
She added: "The Transaction demonstrates IchorCoal’s ability to participate in the consolidation of the South African coal industry and is a significant step forward in our goal of creating a leading mid-tier, pure-play coal producer in South Africa."
Universal Coal focuses exclusively on the development and operation of coal mines in South Africa. The company has a number of coal assets in its portfolio, the most important being the Kangala mine, which has coal resources of just under 150 million t and commenced production in March 2014. Other thermal coal assets include the Roodekop and Brakfontein projects as well as the New Clydesdale Colliery (“NCC”), pending completion of that acquisition. Universal Coal also has interests in a number of metallurgical coal projects in the Soutpansberg and Tuli coalfields, located in the Limpopo province of South Africa. All of Universal Coal’s thermal coal assets are either in the development or feasibility stages and Universal Coal’s entire asset portfolio has attributable reserves and resources in excess of 1 billion t.
"We believe the premium we are paying for Universal Coal is appropriate given the quality of the assets and experience of the management team. The acquisition is strategically important for IchorCoal," Nyembezi-Heita continued. "The injection of fresh capital will enable Universal Coal to develop the New Clydesdale/Roodekop complex, resulting in a significant increase in production and revenues."
Universal Coal’s CEO, Tony Weber, said: "Despite tough market conditions for coal and raising capital, IchorCoal's investment highlights the quality and tremendous growth potential of our assets. We are pleased to have IchorCoal as a cornerstone investor, especially given their experience and expertise within the South African and international coal markets."
Together with the Kangala operation, the development of the NCC/Roodekop complex is expected to significantly elevate Universal Coal's production in the short term. The recently announced increase in processing capacity at Kangala, together with the granting of the mining right at the nearby Brakfontein project, presents a further short-term production and value growth opportunity.
Written by Sam Dodson
Read the article online at: https://www.worldcoal.com/coal/02092014/ichorcoal-buys-stake-in-universal-coal-1274/