Universal Coal could consider acquisitions outside South Africa to diversify portfolio – CEO
11 OCT 2018
Universal Coal [ASX:UNV], the ASX-listed South Africa-focused multi-mine thermal coal producer, could look at options to acquire companies or projects in other countries, including Australia, CEO Tony Weber said.
While the AUD 159.35 m (USD 113.02m) market capitalization company does not have immediate or official plans of doing deals outside of South Africa, Weber said it make sense to diversify its portfolio.
“Personally, I will be honest, I do think it would be good for geographical diversification as well as product diversification (to have a presence in other countries),” he told Mergermarket.
Universal Coal is currently bedding down the acquisition of the North Block Complex (NBC) from Exxaro Coal Mpumalanga and Exxaro Coal, which is expected this quarter, before actively pursuing other deals, the CEO said. Following recent developments on making the deal unconditional, Universal Coal expects the NBC assets to transfer during 2Q19.
Once that deal is complete, it will look to acquire value-accretive production and pre-development projects, most likely in the thermal coal space, which is abundant in South Africa (over coking coal), Weber said.
Universal Coal’s current growth profile that it is pitching to shareholders and the wider market is based on its current portfolio, which includes forecasted 6m tonnes per annum of production growing to 8mtpa in 2019, he said.
As such, while there are “plenty of opportunities” to acquire in South Africa in particular, as well as in Australia, which the company had historically looked at, Universal Coal is not in a position where it will be forced to acquire to grow scale, Weber added. It will be selective in its approach, he continued.
According to the CEO, Australia is an attractive region and if its operations were located there rather than in South Africa, the company would likely enjoy a valuation that is multiples higher.
“We are discounted from a country risk perspective,” Weber noted.
Meanwhile, the company is now awaiting a binding indicative offer from a consortium of investors led by Ata Resources, which is expected by the end of the year, Weber said. In a statement filed to the Australian Securities Exchange (ASX) on 18 September, Ata Resources, on behalf of the consortium, proposed to offer a cash consideration of AUD 0.35 for each Universal Coal share to acquire all the issued shares of the company.
The company’s share price is today trading at AUD 0.30.
Universal Coal is also continuing to assess options regarding its coking coal projects, as no deal has materialized since it began looking at bringing on board offtake partners keen on acquiring equity stakes early in the year. Weber said the process has not been a top priority.
Universal Coal reported its full-year financial results for the year to 30 June, showing that revenue was up 112% to AUD 316m on the previous corresponding period, while it had AUD 38.6m in group cash. FY19 EBITDA is expected to be AUD 93m, an increase of 29% from the prior year, based on forecasted growing production, according to a media statement released yesterday (10 October).
Weber is a co-founder of Universal Coal and has been a mining engineer with more than 15 years’ experience in project assessment, finance, development and operations. He was previously an executive director of Australian listed Platinum developer Nkwe Platinum [ASX: NKP].
Universal Coal uses HSBC Bank Australia, Investec, and First National Bank for banking, while its solicitors are Mayer Brown International and Webber Wentzel Attorneys.