Universal Coal's Kangala thermal coal mine about 65km east of Johannesburg, in the Witbank coalfields, in Mpumalanga

Despite having achieved record revenue and production results for the quarter ending 30 June 2015, African coal producer Universal Coal plans to double its half-yearly EBITDA, while also doubling coal output by the end of 2016.

Universal Coal on Tuesday announced that during the quarter, it had achieved a group EBITDA in excess of A$8 million.

At an estimated A$28 million annualised, the company’s group half-yearly EBITDA is projected to be nearly double its original forecast for the period.

Universal Coal's Kangala thermal coal mine about 65km east of Johannesburg, in the Witbank coalfields, in Mpumalanga
Universal Coal's Kangala thermal coal mine about 65km east of Johannesburg, in the Witbank coalfields, in Mpumalanga

The company’s domestic sales increased 17% to 503 547 t for the quarter, compared to 432 195 t in the previous quarter, while Universal’s first operation, Kangala mine, which reached steady-state production in the first quarter of 2015 achieved record production and sales tonnages, producing 1.7Mt of saleable coal for the 2015 financial year.

The company’s unrestricted cash reserves increased from A$2.5 million to A$6.7 million quarter-on-quarter.

“We are entering a new and exciting growth phase,” says Universal Coal CEO Tony Weber.

“Not only are we on track to double production by the end of next year, but having secured corporate debt financing on more favourable terms than project financing means that the company’s net value will be significantly enhanced, demonstrating its ability to bring long-life, multi-product coal operations to full production.”

In April 2015, the company obtained a senior secured debt finance facility of A$55 million from Investec Bank, enabling it to fund the final phase of capital development at its second mining operation, the New Clydesdale colliery (NCC).

NCC, which is located on the southern margin of the Witbank coalfields, about 70 km east of its Kangala mine, is scheduled to be fully commissioned later this year, is on track to begin production by the end of 2015.

NCC is also expected to produce 2 Mtpa of coal at full capacity at the lowest costs quartile for high-end domestic markets.

“We trust that commissioning NCC on schedule and doubling production by 2016 will result in the Universal Coal share price reflecting its true value over the next year,” says Weber.

Universal’s new financing facility will also be used to refinance the debt component of the development capital for Kangala mine. Since the mine has now reached steady-state production, existing project finance facilities are being replaced with more favourable and flexible corporate debt facilities.

During the September 2015 quarter, Universal Coal aims to complete the NCC acquisition, conclude the offtake and Coal Sales Agreements for NCC, commence with the development at Roodekop and plant reconfiguration at NCC and appoint the processing plant contractor at NCC.

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