Universal Coal Plc
Universal Coal Plc
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(CORPORATE)
Australian-based management of coal producer TerraCom has taken operational management control of its South African mines in an attempt to overcome the financial and operational performance issues that dragged it to a heavy interim loss.
Coal producer TerraCom is confident a dose of Aussie business management and operational knowhow can help it turn around the performance of the South African mines it acquired through its takeover last year of Universal Coal.
Health issues arising from a recent accident have led Australian businessman Wal King to resign as non executive chairman and director of coal miner TerraCom.
King, the former chief of construction company Leighton Holdings (now CIMIC), has led TerraCom since late 2017 through the ramp-up of the Blair Athol mine in Queensland and acquisition of South African producer Universal Coal with its extensive portfolio.
He will continue with the company in a consultancy role.
TerraCom is taking “decisive action” to reduce operations and unit costs at its Blair Athol thermal coal mine in Queensland, Australia to cope with the market volatility resulting from the global COVID-19 pandemic.
Australian coal producer TerraCom is slashing production at its Blair Athol mine in Qld by 50% over the next 13 months to cut costs under global COVID-19 market uncertainty.
From its FY20 coal sales guidance of 3Mt released in Feb, Terracom now expects the Bowen Basin thermal coal mine to deliver 2.5-2.6Mt for the year to end-June this year and about 2Mt for FY21.
It says reducing production will significantly reduce costs by reducing its truck and excavator mining fleet and cutting back from 24/7 to 5-day, single-shift rosters.
Universal Coal remains confident of achieving its EBITDA guidance of $A73M in the June year after its record group result of $22.3M in the March qtr (Q3FY20) based on sales from its South African thermal coal operations of 1.98Mt, up from 1.7Mt in the previous period. ROM coal production increased to 3.1Mt (Q2: 2.8Mt).
CEO Tony Weber says Universal remains profitable despite the pressure on volumes due to softer demand on the back of COVID-19.
UK-based Universal Coal has dropped its legal action and advised remaining shareholders to accept TerraCom’s cash-plus-shares offer after the Australian bidder lifted its entitlement past 90% of its shares and launched steps for the mandatory acquisition of the reminder.
After fighting the $A294M offer all the way, Universal says the stand-out shareholders are entitled under the UK Companies Act to receive the full offer value of 10c plus 0.6026 TerraCom shares for each of their Universal shares.
South African coal producer Universal has come out strongly opposing the takeover bid from TerraCom after its independent expert concluded the unsolicited offer is neither fair nor reasonable.
Australian-based TerraCom, which aims to establish a $A294M combined entity, valued its cash-plus-shares offer as 33.5c per Universal share.
Universal Coal is relying on a 200%-plus leap in earnings during the second half of the financial year, maintaining EBITDA guidance of $A73M for FY20 after posting $24M in the six months to Dec 2019.
While the H1 result compares to $53.3M in H1FY19, the South African-focused miner said the expectation of $49M in H2 signals its confidence in a return to expected profitability.
And now it’s official. Australian-based international coal miner TerraCom has released the formal offer for South African-focused Universal Coal, repeating its claim it can already meet the 47.3% minimum acceptaince condition through its existing 19.999% stake and committed support from institutional shareholders.
Terracom says a merger would result in an entity with $A294M market cap through its 33.5cps offer, comprising 10c cash plus 0.6026 shares for each Universal share.