While its shares have dived with the rest of the market in the wake of the European debt crisis to below A15c, Paterson believes they are worth 30c.

“UNV (Universal Coal) looks very cheap on a number of metrics considering the stage of development and defined resources of its projects,” according to Patersons.

“Including cash and corporate expenses our net actual valuation for UNV is $71 million or $0.30/share.”

UNV has a strong management team and a pipeline of domestic and export coal projects, Patersons said.

It is currently managing five projects that are at various stages of development. All have resources totalling 1.9 billion tonnes, of which 741Mt are attributable to UNV.

Off-take agreements, rail and port allocation and partnerships are being negotiated.

UNV’s Kangala thermal coal project will be its first project into production.

“We have valued the Kangala project using a discount cash flow model with an eight year life of mine and first production in Q3 CY2013,” Patersons said.

“We have assumed the capital expenditure defined in the bankable feasibility study optimisation, $50 million, to establish the mine with operating expenses of $16/t. Revenue from ROM sales at the mine gate are fixed price which we have calculated as $31/t.”

UNV’s 70.5% of the discounted cash flow net present value equals $61 million or $0.26 per share, according to Patersons.

“UNV has defined considerable tonnage within its other tenements. The resources attributed to UNV current ownership of these tenements is 274Mt in the Measured and Indicated (M&I) categories and 741Mt total resources,” it said.

“The market is currently valuing these at $0.11/t and $0.04/t respectively.

“We have attributed $0.10/t, which is very cheap for bituminous coal resources, to the M&I tonnages, excluding Kangala, to add $23.7 million or $0.10/share to our net actual valuation.”

Kangala’s optimised Bankable Feasibility Study (BFS) was released in April 2012 and UNV has all the required permitting including water. It has also executed a binding term sheet and MoU for a Coal Supply Agreement with the major South African power utility, Eskom.

Development is scheduled for later this year with first saleable coal to be delivered in 2H CY2013.

Patersons identified the receiving of funding for Kangala and a resource upgrade of the project as possible catalysts for a rerating of UNV.