ASX-listed Universal Coal reports it has entered into an agreement with Exxaro, South Africa's largest listed coal miner, to acquire the Arnot South project.
"The acquisition of Arnot South increases Universal Coal's thermal resource base by 25 %, further strengthening our position in the Witbank coal field, South Africa's most important source of thermal coal," says Tony Weber, Universal's CEO.
Universal Coal's Kangala mine near Delmas, its sole producing asset at present, delivered its first saleable coal in April 2014 – on time and within budget (photo: Universal Coal).
"With Kangala having achieved steady state operations at 2,8 million tonnes per annum run-of-mine (Mt/a ROM) and the approximately 2 Mt/a ROM New Clydesdale Colliery (NCC) expected to be in full production in the latter part of this year, Universal Coal is now pursuing coal ventures capable of supporting larger (+3 Mt/a), longer-term operations. Arnot South not only meets this requirement, but also hosts excellent quality coal that allows processing flexibility and offers coal product optionality.
"The acquisition marks another key step towards growing the company into a sustainable mid-tier coal producer in the medium term."
The Arnot South prospecting right is located approximately 65 km east of Emalahleni (Witbank) and 50 km north-east of Universal Coal's NCC project in the Witbank coalfield. The prospect is 15 212 ha in size and has been subject to several drilling campaigns since the 1970s by major mining companies including Gold Fields and, most recently, Exxaro. A total of 275 boreholes has been drilled historically.
Exxaro established that Arnot South was no longer strategically aligned with its group strategy and embarked on a public disposal process, with Universal Coal being the successful bidder.
The Arnot South project is a multiple seam deposit that hosts three of the coal seams (Nos 4, 3 and 2) typically present in the Witbank coalfield. The JORC-compliant in-situ coal resource at Arnot South totals 97,70 Mt. The No 2 seam, which represents 92 % of the resource and is largely extractable by underground means, is at this stage considered as the only seam with economic potential.
Universal Coal is currently the subject of an unsolicited takeover offer by Ichor Coal NV, which already holds a nearly 30 % stake in Universal. The independent directors of Universal have deemed the offer unacceptable and have advised shareholders to reject it.