HomeCoalAfrimat backs down from proposed acquisition of Universal Coal

Afrimat backs down from proposed acquisition of Universal Coal

ASX-listed Universal Coal has announced the withdrawal of a non-binding indicative offer previously received from Afrimat to purchase it.

Universal refers to its announcement of 8 April 2019 regarding the receipt of the non-binding indicative offer (NBIO) from Afrimat to purchase the entire issued share capital of Universal and subsequent announcement dated 15 April 2019.

Despite the company’s ability to prove robust cashflows and significant growth projections, Afrimat has advised Universal that it has decided not to proceed with the proposed acquisition given the size and complexity of the proposed transaction.

As a result, the due diligence process and negotiations in respect of the NBIO have been terminated, and the company’s dataroom has been closed.

“The last 12 months has been a very busy period for Universal, with two separate takeover proposals being received, each of which has required the dedication of significant management time and expense,” says Universal Coal CEO, Tony Weber.

“The corporate interest we’ve received is reflective of the cash generative nature of our business and strong platform we now have for further growth with the successful integration of the North Block Complex and development of Ubuntu, which will shortly become our fourth producing mine.

“We look forward to continuing to deliver on our business plan as an independent entity, focusing on continued growth and returns to shareholders through dividends.”

Project updates

Universal has commenced the development of its fourth operation – the Ubuntu Colliery. Universal finalised the acquisition of the surface rights for Ubuntu in April 2019 and now holds all required regulatory approvals to commence development of the project.

The Ubuntu Colliery is located in South Africa’s Witbank coalfield. Universal holds a 70.5% interest, and hosts a JORC compliant thermal coal resource of 75.8 Mt, of which 31.7 Mt are in the measured category. It is expected that opencast mining will be undertaken at Ubuntu, with crush and screen beneficiation to occur on site.

Ubuntu is 51%-owned by Ndalamo Resource and 49% by Universal Coal and Energy Holdings South Africa (UCEHSA). UCEHSA, a wholly-owned subsidiary of Universal.

Universal Coal to achieve full year EBITDA guidance

The company is on track to deliver the Universal group’s earnings before interest, tax, depreciation and amortisation (EBITDA) guidance for FY2019 of A$93 million and a total of 6.6 Mtpa of saleable product delivered to market.

Universal Coal has been affected in FY2019 by a significant reduction in the thermal coal export price, but has managed to counter most of the financial impact by the increased production.

It remains invested in its progressive dividend policy at 45% of attributable net profit after tax (NPAT). In the last 12 months the company has delivered dividends totalling A$0.03 per share, equivalent to a dividend yield of 9.8% based on its closing share price of A$0.305 on ASX as of 2 July 2019.

Universal Coal is ready to deliver on two of its growth commitments with the development of Ubuntu and the extension of the Kangala Colliery.

Further, the company remains confident that all regulatory approvals for the Eloff Project will be received in advance of the planned commencement of development in FY2021.

The development of Ubuntu and the extension of the Kangala Colliery are projected to increase the company’s total saleable product to market.