Santa delivers Universal a mining permit for a potential fifth coal mine
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Hotly sought-after Universal Coal has secured a mining permit and environmental approval for its jointly owned Eloff project.
The South Africa-focused thermal coal producer (ASX:UNV) — currently the subject of its third takeover approach — has a 49 per cent stake in Eloff Mining Company, which owns 100 per cent of the Eloff project.
Universal has been aggressively growing its production profile through multiple recent acquisitions and reserve updates.
Last week Universal revealed it had grown the coal reserve at its newly acquired North Block Complex by 98 per cent to 55.5 million tonnes.
The company also reported a nearly 50 per cent increase in thermal coal production from the project, with 208,000 tonnes produced in November compared to the 140,000-tonne-per-month rate previously achieved.
Meanwhile, the Eloff project, which is located right next to Universal’s Kangala coal mine, adds 424 million tonnes to the company’s resources and reserves.
Universal says there is also the potential to increase that resource substantially.
The eastern part of the Eloff project is a direct extension of Kangala’s current pit and the western part has the potential to be developed into Universal’s fifth standalone mine.
Universal says it is now just waiting on the integrated water use licence and the waste licence and it can then start building its next mine.
Buyers lining up
In late October, the company was handed a formal $183m offer from a consortium of investors led by Ata Resources, a private entity incorporated in South Africa.
The consortium made a binding, conditional commitment to make an offer of 35c cash per share which values Universal at a nearly 17 per cent premium to its share price the day before it received the initial offer in September.
Universal’s share price is currently trading around the offer price.
The proposal, however, is still conditional upon the negotiation and execution of a transaction implementation agreement between Universal and the consortium.
The formal commitment comes after Ata Resources received promises from a second major shareholder of Universal that it would accept the offer.
Coal Development Holding, which has a 27.5 per cent stake and Ichor Coal, which owns 29 per cent, have both agreed to vote in favour of the deal.
Between the two shareholders they have four directors on the eight-director board.
This latest offer is the third approach Universal has received, and boss Tony Weber told Stockhead in October that the company is “significantly undervalued” relative to its Aussie peers because its mines are in South Africa.
“[The offer] is a premium to the share price, but you look at the cash we’ve been generating relative to other Australian companies, you see it is a significant discount to what an entity generating this kind of cash would be achieving if it was operating in Australia,” Mr Weber said.
The company reported a record 800 per cent profit increase to $35.9m for FY18 and it is still expanding.
The company sold 4.7 million tonnes of coal in FY18 — a 57 per cent improvement over the prior year — and it forecasts it will produce 6 million tonnes this financial year.
Universal’s goal is to grow its output to more than 8 million tonnes next year and top 10 million tonnes the year after.