NCC will make Universal a multi-mine coal producer

TAKEOVER target Universal Coal expects to become a multi-mine coal producer before year-end following its acquisition of the New Clydesdale Colliery (NCC) in the Witbank coalfields of South Africa.

Lou Caruana

Universal Coal assumed official ownership of NCC after paying the final instalment of the purchase price to the previous owner, Exxaro Coal Mpumalanga, following the grant of South African Ministerial approval in terms of Section 11 last month.

The company said it will now focus on recommissioning NCC's existing processing facilities for Phase-1 open-cut development, which are expected to process up to 2 million tonnes per annum run-of-mine of hi-grade domestic thermal and low-phosphorous metallurgical coal. It expects to supply this primarily to the South African market.

A long-term Coal Sales Agreement with South African power utility Eskom Holdings SOC to supply up to 1.2Mtpa hi-grade domestic thermal coal from NCC is nearing settlement with consensus already reached on key terms, including coal quality, quantity and key commercial terms, Universal Coal CEO Tony Weber said.

“We are delighted to officially acquire NCC, which marks a major step forward on our path to become a leading mid-tier, multi-product coal producer,” he said.

“Our first operation, Kangala, continues to exceed expectations. It achieved record sales in July and is delivering strong cash flow throughout 2015, while production has increased.

Importantly, wage agreements have now been secured with employees of Kangala's mining contractor and plant processing contractor, ensuring labour stability through to 2018.”

Universal Coal’s major shareholder, Ichor Coal, last week launched an unsolicited bid for the South African coal mining group.

IchorCoal, which already owns 29.9% of Universal Coal's issued shares, proposes to offer 16c for each ordinary share of the company that it does not already own, valuing Universal Coal at approximately $A81 million.

The independent directors of Universal Coal recommended that shareholders do not take any action or make any decision in relation to their shareholding until the independent directors have had an opportunity to fully consider the proposed offer and provide a formal response.

NCC provides Universal Coal with its second, long-term, significant coal producing asset within the span of two years, Weber said.

“We look forward to bringing the operation on stream with first production planned for later in 2015,” he said.

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