ASX-listed Universal Coal has announced that a subsidiary of the company, North Block Complex has entered a sale and purchase agreement with Exxaro Coal Mpumalanga and Exxaro Coal for the acquisition of assets that comprise the North Block Complex.
North Block Complex (NBC) is a company owned 51% by Ndalamo Resource and 49% by Universal Coal and Energy Holdings South Africa (UCEHSA).
UCEHSA is a wholly-owned subsidiary of Universal Coal.
Once the North Block Complex is acquired, NBC will operate on a stand-alone basis.
NBC will, however, be under the management control of UCEHSA and be provided with management services from UCEHSA by an operating and management agreement between NBC, UCEHSA and Ndalamo.
The North Block Complex
The North Block Complex is an operational mining and minerals processing business, located proximate to Belfast in the Mpumalanga Province of South Africa.
In summary, it consists of the Glisa and Eerstelingsfontein operating mines and the undeveloped Paardeplaats prospecting right.
It is expected that the Eerstelingsfontein operating mine will be near, or at the end of, its life by the time NBC takes ownership of the North Block Complex.
It is expected that the Glisa operating mine will have a remaining life of mine of approximately two to four years by the time NBC takes ownership of the North Block Complex, assuming that the transaction completes on or about 31 December 2018.
Significant value is placed on the Paardeplaats prospecting right.
The North Block Complex is an open cast operation and is located in proximity to the State-owned power generator’s Arnot, Tutuka and Komati power stations.
Over the last four years, the mines that comprise the North Block Complex have averaged a run of mine (ROM) production of approximately 3.5 Mtpa, similarly with sales of around 2.7 Mtpa.
Historically, the mined coal has been sold primarily to Eskom for power generation, with a small amount of higher value sized product sold to domestic traders.
Mined coal is partially beneficiated, with final products being a blend of both washed product and crushed raw coal.
The North Block Complex infrastructure consists of a Dense Medium Separation coal beneficiation plant and four crushing and screening plants, a water treatment facility and a rail siding that provides direct access to the Richards Bay Coal Terminal.
Universal Coal intends to convert the North Block Complex to a multi-product operation with the gradual inclusion of the adjacent Paardeplaats project.
This will increase exposure to higher margin export markets, whilst maintaining supply of coal to local power stations.
Current facilities on site are adequate with minor modification and expansion to achieve the proposed operation of both Glisa and Paardeplaats, with a modest need for further capital investment.
It is expected that NBC will be able to fund any additional capital requirements from generated cash flows.
Once in operation, Paardeplaats is anticipated to be a lower quartile cost mine producing 25.1 Mt ROM over a life of mine of 10 years at an average stripping ratio is 1.66:1.
The North Block Complex currently employs more than 180 staff and 1,100 contractors, and NBC intends to maintain existing contracts and employees to achieve its operational objectives.
“This strategic acquisition significantly increases Universal Coal’s robust production profile and importantly, it provides the business with considerable optionality and diversification through exposure to additional high margin export markets,” comments Universal Coal CEO, Tony Weber.
“We intend to convert the North Block Complex into a multi-product mine through the integration of production from the adjacent Paardeplaats project, which once fully operational, has the potential to increase Universal Group’s saleable tons by well over 50%.
“We look forward to finalising the acquisition as we believe it has the potential to create significant value for our shareholder base and Universal Coal will provide further updates on the acquisition in due course.
“Universal Coal has an active merger and acquisition strategy and we continue to assess opportunities that add scale to our production and are earnings accretive immediately or within a short time frame,” concludes Weber.