Universal Coal locks in $12M funding agreement

SOUTH-Africa focused Universal Coal is only one year out from bringing its Kangala thermal coal project into production and is proving its commitment to making it happen, announcing it has secured a $A12 million converting note facility from financial institution Susquehanna International Group.
Universal Coal locks in $12M funding agreement Universal Coal locks in $12M funding agreement Universal Coal locks in $12M funding agreement Universal Coal locks in $12M funding agreement Universal Coal locks in $12M funding agreement

Universal Coal's projects in South Africa.

Lauren Barrett

The coal developer is focused on its two flagship assets in South Africa, the Kangala project and the Berenice-Cygnus coking coal project.

Berenice-Cygnus is situated in the emerging Soutpansberg coalfield, while Kangala is located about 65km east of Johannesburg in the Witbank coalfield.

The strategic funding with Susquehanna, which has an established presence in the US and Australia, will enable Universal Coal to advance works on the Kangala and Berenice-Cygnus project and will also provide it with general working capital.

A Universal Coal spokesman told ILN the note facility was an important step in the company’s plan to become a leading mid-tier company.

“This funding was identified in the strategic next step to take us forward and further advance our projects,” the spokesman said.

The agreement would also ensure Universal Coal had a healthy balance sheet with the terms of the funding arranged so as to not dilute shareholders.

Universal Coal chairman Tony Harwood said achieving this agreement with Susquehanna was something many junior companies had not been able to do.

“For an emerging developer of coal assets and near-term producer, Universal believes this facility is a new and innovative concept and is not typical of the terms junior companies are usually able to achieve in challenging equity capital markets,” he said.

The spokesman told ILN the strategy which was endorsed in January was a win for Universal Coal, its shareholders and Susquehanna.

“They [Susquehanna] have identified that Universal has some great strategic upside and opportunities over the next few years,” the spokesman said.

“The seven-year note shows that we have the flexibility and the structure to achieve our objectives and grow the market capitalisation of the company.”

Approximately $3 million of the funds has been earmarked for the second phase of drilling at the company’s Berenice-Cygnus coking coal asset, which aims to drill 100 holes and will finish up in June.

The tenement has a gross in situ resource of 1.3 billion tonnes.

Some of the funds will be used for engineering for Kangala, which is tipped to be in production in early 2013.

Key terms of the funding include an initial drawdown of $7 million with a seven-year converting bond term.

Following the initial drawdown in May 2012, a balance drawdown option will be available for the remaining $5 million at September 1, 2012.

The Universal Coal spokesman confirmed to ILN that it was in advanced discussions with domestic power utility Eskom for the offtake of thermal coal from its Kangala project.

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