ASX-listed mid-tier coal mining company Universal Coal today announced that it has secured a senior secured debt finance facility of R525 million from Investec Bank.
This will enable the company to fund the final phase of capital development for its second mining operation, the New Clydesdale colliery (NCC).
Located on the southern margin of the Witbank coalfields, about 100 km north-east of Johannesburg and 70km east of its Kangala mine, the first phase of the NCC project is scheduled to be fully commissioned later this year. It also sits adjacent to Universal Coal’s undeveloped Roodekop project.
At full capacity, NCC (currently in acquisition) will produce 2Mtpa of coal for high-end domestic markets.
A long-term coal sales agreement (CSA) is currently being negotiated with both power and metallurgical off-takers for the use of coal from NCC which, with reserves of 40.5Mt, is expected to have a life well in excess of 20 years.
The new financing facility will also be used to refinance the debt component of Universal Coal’s Kangala colliery. Since this has now reached steady state operations, existing project finance facilities are being replaced with more favourable and flexible corporate debt facilities.
“We are entering an exciting growth phase. Once we reach steady-state production at NCC, the company’s net production will have doubled.
“Further, by securing corporate debt financing on more favourable terms than project financing, Universal Coal’s net value will be significantly enhanced, and its ability to bring long-life, multi-product coal operations to full production demonstrated.” says Universal Coal CEO Tony Weber.
Financing facility details
Funds from the Investec debt financing facility will be drawn and applied as follows:
- Tranche A: This will be used to settle the current project finance facility of R285 million.
- Working capital facility: A facility of R25 million will be used to provide working capital for the Kangala colliery.
- Tranche B: A final amount of R215 million will be used to fund the balance of capital development activities at NCC.
Repayment of Tranche A will follow a quarterly cycle over twenty repayment periods, with interest being serviced simultaneously, while the revolving working capital facility has a tenor of five years and must be repaid at the end of the period.
Repayment of Tranche B will benefit from a repayment holiday for the first 12 months, and sixteen quarterly repayments will be made thereafter. Interest on this second tranche will be serviced quarterly following drawdown.
NCC development status
Ministerial approvals are expected early during the next quarter pending certain rectifications required by the DMR.
Universal Coal has further completed a bankable feasibility study for the initial phase of the NCC project, which has been approved by the board subject to finalisation of the CSA. Project development will continue as scheduled, with on-site mining activities to commence upon conclusion of the CSA.
The opencast tender process for mining at Roodekop has been completed and a preferred contractor nominated. Contractual agreements are in the process of being drafted. Tender documents for the construction of processing plants have been released to pre-selected parties, with adjudication and selection processes currently under way.