Pan African Resources wholly-owned subsidiary, Pan African Resources Coal holds a 91% shareholding in Uitkomst colliery with the remaining 9% held by broad-based trusts and a strategic entrepreneur’s trust.
JSE/ASX/AIM-listed Coal of Africa has continued to restructure its balance sheet to align its project pipeline and ensure that it is well positioned to unlock shareholder value through its flagship Makhado development project.
As part of this restructuring, the company recognised that limited cash flow will be generated during the Makhado pre-production phase over the next three to four years and therefore the company has been focused on acquiring a cash generating asset.
In light of this, the Uitkomst acquisition represents a highly compelling and attractive value proposition that Coal of Africa believes to be value accretive and which will provide cash flows to support the company as it continues to progress its flagship Makhado project.
Coal of Africa believes that Uitkomst will complement its flagship Makhado project and development project pipeline by creating a sustainable, multi-product mining group with a skilled team with excellent resources adding to the development profile.
In addition Uitkomst will provide positive cash flows and enlarge the company’s asset base that provides a stronger proposition to access the necessary funding required to pursue the development of the enlarged group's growth opportunities.
It will also position Coal of Africa as a potential consolidator with a management team capable of delivery.
The transaction will be settled by a combination of cash and shares in Coal of Africa.
A closer look at Uitkomst colliery
Uitkomst is a high-grade thermal export quality coal deposit with metallurgical applications situated in the Utrecht coal fields in KwaZulu-Natal. Uitkomst consist of an existing underground coal mine and a planned life of mine extension into the northern area.
The South Mine is an easily accessible and well-established operating mine. Existing infrastructure such as power supply, water supply, buildings, workshops, weighbridge, water storage and management facilities are all in place. Uitkomst currently employs approximately 520 employees (including contractors).
For the six months ending 31 December 2016 the operation processed 236 011 t and sold, including acquired coal, 327 202 t of metallurgical quality coal that generated a revenue of R225 million. Uitkomst had a net asset value of R209 million and made operating profits of R21.3 million for the six months ended 31 December 2016 as disclosed in the interim financial statements of Pan African Resources.
Feature image credit: Coal of Africa
(A drill rig on site at Coal of Africa's Makhado project in Limpopo Province, South Africa)