First will be the KPMG Independent Expert’s Report commissioned by Universal, which is expected imminently, according to Universal chief executive, Tony Weber. The document should provide a “fair value” of the business and perhaps lay a starting point from Universal’s side on where it thinks the offer price should be.

The company reached steady-state production at its Kangala open pit mine earlier this year.

Management is working on bringing a second mine, the New Clydesdale Colliery, back into production before the end of 2015 and steady state by the middle of next year.

"The crux of the matter is [the offer] is low for where we are going – the company is just starting to show value,” Weber told International Coal News’ sister publication Mining Journal.

“If you look at our first half of year, where we hit steady state, we had A$14 million EBITDA, and in the past we said we were going to show $15 million on an annualised basis, so the year’s forecast is now for $28 million.”

Ichor has offered cash of A16c per Universal share, valuing the entire company at $A81 million and at a 45.5% premium to the closing price immediately prior to the announcement.

From Frankfurt-listed Ichor’s side, the formal offer is pending, and while CEO Nonkululeko Nyembezi-Heita said the company was not bound by the 28-day deadline it mentioned in the intention to make an offer announcement on August 20, she added the timing would be pretty close.

“We will be trying very hard to meet the timeline, but clearly if we slip a day or two, because we are not caught by the code it would not make a difference, but certainly mid-September would be a good time to start looking out for that offer,” she told Mining Journal.

Both CEOs recognise this argument is merely about value, with Ichor saying it made it clear when buying its initial 30% stake last October that it would return for the whole of Universal at some point.

“When we invested the first time, it was made clear that we had appetite to take it to majority and there were no hostilities, or animosity or unwillingness to contemplate such an outcome on anybody’s part,” Nyembezi-Heita said.

According to Universal, Ichor actually made an initial approach in June, suggesting a 14c/share offer to the company.

Nothing came of this and it then returned a month later with a 16c number that was rejected. It then decided to take the offer direct to shareholders.

Most of Kangala’s 1.8-2.5Mtpa production will be sold locally to state utility Eskom under sales agreements, with about 100,000t exported annually out of Richards Bay.

This means the sales lack the blue sky of spot export prices but provide steady, stable income for the producer.

“Eskom is an annuity, you have got steady cashflow, you agree your pricing with them and as long as you perform and you perform well, you maintain your margins and you generate healthy cashflows which we are actually doing and showing to the markets at present,” Weber said.

Ichor plans to fund the transaction via €48 million rights issue, underwritten by Luxembourg based Sapinda Invest.

The company also plans to include a 90% acceptance condition on the transaction.

Since joining in March 2014, Nyembezi-Heita said the plan was to make Ichor a significant coal producer, targeting about 15Mtpa of annual attributable production capacity from the current production of around 2.1Mtpa.

“There is a reason why majors are big, because it is much easier to manage your cost structures if you have a much bigger footprint. The economies of scale become a much more important thing in a downturn, far more important than in an upturn,” Nyembezi-Heita said.

“So I can’t see how small companies survive if this continues for a long time.”

The company recently closed a deal to buy two former Continental Coal assets for R128 million after they were put into business rescue last year.

“Ideally those are the kinds of mines that we would like to acquire, but there aren’t many like that. We will be looking for those that are struggling to make it on their own and are looking for a home and hopefully we can always do it amicably,” Nyembezi-Heita said.

“We have said that we want to get to 15Mtpa [attributable] by 2017, so to get to that, if we are successful with Universal, there would still be a gap.”

Gareth Tredway is deputy editor of ICN sister title, Mining Journal.