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CoAL agrees terms to acquire Universal Coal

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World Coal,

Coal of Africa (CoAL) and Universal Coal have agreed the terms of an offer that would see CoAL acquire Universal for AUS$91 million. The offer represents a 35% premium on the Universal share price on 30 October and a 56% increase to the Ichor Coal offer.

“This is a compelling offer that immediately crystallises value for our shareholders, yet allows shareholders to retain exposure to the consolidated group,” said Tony Weber, CEO of Universal. “Looking ahead, we see exciting times for the merged group.”

Universal Coal is a South African coal company that producers 2.4 million tpy with a pipeline of near term production, including 2 million tpy coming online in 2016.

CoAL will finance the deal with existing cash reserves, through the proceeds of a US$15 million equity investment from Yishun Brightrise and a US$3 million equity investment from another unnamed strategic partner.

“The combination of Universal’s producing assets and CoAL’s development portfolio, coupled with the excellent shareholder support, ensure that the merger, as a first of its king in the South African coal industry, will not be the last,” commented David Brown, CEO of CoAL. “We see the enlarged group as a springboard to creating a new coal mining force.”

The combined group’s assets will include the Vele coal mine and Makhado hard coking and thermal coal project, as well as interests in the Kangala and New Clydesdale coal mines.

The CoAL deal comes after Universal Coal received a takeover offer from Ichor Coal in August that valued the company at AUS$80.9 million – a price the Universal board described at the time as “inadequate, highly conditional and opportunistic.” Since then, Universal’s independent directors have sought alternative offers, a process that has resulted in the deal with CoAL.

Following the conclusion of the deal, CoAL said it intends to retain key personnel from Universal as an important part of delivering the business’ future strategy: “ CoAL views Universal as an extremely well-managed business and intends to utilise the services of the current Universal executive management team.”

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