IchorCoal notified the Australian Stock Exchange last week it will not extend its cash takeover offer for ASX-listed South African coal miner Universal Coal, which expires on 5 February 2016.

On 30 September 2015, IchorCoal made a cash offer for the entire issued and to be issued share capital of Universal Coal that it does not already own at A$0.16 a share.

IchorCoal said that it would not extend its offer for several reasons.

Shareholders have had enough time to consider the detail of IchorCoal’s offer and there is a reduced possibility of the deal being accepted due to the current Universal Coal share price relative to IchorCoal’s offer price as well as the competing Coal of Africa Limited (CoAL) offer, the company said in a statement.

IchorCoal said that delays in Universal Coal finalising a coal sales agreement with Eskom for the New Clydesdale Colliery (NCC) and the reduced value proposition of Universal to IchorCoal in Australian dollar terms given the recent depreciation of the South African rand were also factors in the decision.

IchorCoal holds 29.99% of the existing issued share capital of Universal Coal and as its single largest shareholder, IchorCoal said it would be helpful to shareholders assessing the CoAL offer if further detail was provided about the debt burden CoAL will assume following its offer for Universal Coal, given the loan note alternative under the offer and its existing obligations.

Pro forma financials provided in the CoAL offer document imply gross debt of over US$100 million (before interest), with significant near term repayments, compared with only $59 million in available cash.

Given CoAL’s project development obligations and forecast near-term cash flow, IchorCoal said further detail on CoAL’s ability to service this debt burden would be useful to shareholders.

Taking into account Universal Coal’s own project development activities at NCC as well as its own debt service obligations, IchorCoal does not anticipate that UNV will pay material dividends, if any, in the near term to contribute to CoAL meeting its project development and debt obligations.

Universal Coal had negative net operating cash flows of A$2 million in the half year ended 31 December 2015, has never declared a dividend and has not announced an intention to declare a dividend in the near term.

“IchorCoal retains a strategic shareholding in Universal Coal and will continue to work with Universal Coal as an independent listed company to maximise value for all shareholders,” says IchorCoal CEO Nonkululeko Nyembezi-Heita.

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