South Africa's Ichor Coal has proposed to acquire the shares in Universal Coal in an all-cash transaction valued at about A$80m ($58m).
At present, the company owns 29.99% of Universal Coal's issued ordinary shares following the conversion of its preferred shares this month.
Ichor Coal plans to fund the acquisition from the proceeds of an equity capital raising exercise, underwritten by principal investment holding company Sapinda Invest.
With a market capitalisation of €273.1m as at 20 August and attributable mineable resources of about 400 million tonnes of coal on 16 properties, IchorCoal is looking to increase its existing production of around 2.1 million tonnes a year to 15 million tonnes by 2017.
IchorCoal CEO Nonkululeko Nyembezi-Heita said: "Owing to our achievements of 2014 and despite the backdrop of depressed commodity prices, IchorCoal is well on its way to reaching its medium-term objective of positioning the company not only as a successful mid-tier producer but as South Africa's pre-eminent medium-sized coal miner.
"The proposed offer price fairly values Universal Coal's asset base and growth pipeline, while recognising the inherent risks, time and investment required to develop its portfolio of assets."
Universal Coal's South African projects contain more than two billion tonnes of coal resources at three thermal coal projects as well as two coking coal assets.
In February last year, the company's Kangala mine achieved first production while technical completion was achieved in December.
"In the context of the current challenging market conditions, we believe that the combination of Universal Coal and IchorCoal's existing South African coal operations provides a more robust platform to manage the uncertainty prevailing in the coal sector," Nyembezi-Heita added.
Image: Universal Coal's Kangala mine. Photo: courtesy of Universal Coal plc