South Africa-focused coal miner Universal Coal last week announced a A$24.5-million investment from Frankfurt-listed IchorCoal.

Under the terms of the proposed transaction, IchorCoal – headed by former ArcelorMittal South Africa CEO Nonkululeko Nyembezi-Heita – would invest the capital in two placements. In the first tranche, the company would subscribe for 80.44-million shares in Universal, at a price of 14.5c each, to raise an initial A$11.7-million.

A second subscription of 71.22-million non- voting, noncumulative convertible shares would follow, at a price of 18c each, to raise a further A$12.8-million.

Subject to shareholder approval, Universal would also grant IchorCoal warrants to subscribe for 71.22-million ordinary shares, exercisable for a period of 18 months from the completion of the subscription agreement, at a strike price of 36c each.

Meanwhile, subject to shareholder approval, major shareholder Coal Development Holding (CDH) would also subscribe for 6.25- million shares, at a price of 16c each, to raise A$1-million. CDH would, subject to shareholder approval, also exercise its conversion rights under its existing A$3.25-million convertible loan note, which would convert at an effective price of 12.5c a share, for the issue of 26-million ordinary shares.

Universal CEO Tony Weber told shareholders that the funds raised would complete the financing of the New Clydesdale colliery acquisition and would part-fund the development of the Roodekop project, while the remainder of the cash would go towards working capital and implementing further acquisition opportunities if they arose.

“Despite tough market conditions for coal and raising capital, IchorCoal’s investment highlights the quality and tremendous growth potential of our assets. We are pleased to have IchorCoal as a cornerstone investor, especially given their experience and expertise within the South African and international coal markets.”

Following the subscription agreement, IchorCoal would hold an 18.51% shareholding in Universal Coal and would increase this to 29.99% if it converted its preferred shares into ordinary shares.

“The investment represents another significant milestone for the company and comes on the back of our first operation at Kangala achieving steady-state production and generating strong positive cash flows further augmented by commencing export sales,” Weber said.

“Together with the Kangala operation, this investment is expected to elevate total group production and coal sales significantly.”

Further, the granting of the mining right over the proposed third mine at Brakfontein, and the excess capacity at Kangala, could also lead to further significant production growth in the near term,” Weber said.