Boikarabelo first coal target slips as Resgen aims for March financial close

PERTH (miningweekly.com) – Dual-listed Resource Generation (Resgen) has pushed back the expected date of first coal production from its Boikarabelo mine in South Africa’s Waterberg region, as talks with potential financiers to secure the best funding package continue.

The emerging producer in August entered into a R5.52-billion funding agreement with a financing syndicate, including Rand Merchant Bank, the Public Investment Corporation, the Industrial Development Corporation and Noble. It has since been working towards fulfilling the conditions precedent and said on Friday that it hoped to achieve the required internal credit committee approvals by mid-December.

Discussions are also under way with the Export Finance and Insurance Corporation to join the current funding syndicate, and a due diligence is in the works.

The mid-December approvals target represents a “slight slippage” in Resgen’s preferred timeline to develop the mine, but the company said that, if achieved, it meant financial close would likely be reached by March 2017, with the Boikarabelo mine producing its first coal in the first quarter of 2019.

The initial “first coal” target was the final quarter of 2018.

Resgen said that the slight delay in financial close of the project funding had improved confidence among the funding syndicate as the seaborne thermal coal market had shifted significantly upward in the past three months, with sales now being reported at a 40% premium to the long-term price assumption of the mine’s financial modelling. Although the miner is only cautiously optimistic, as the price movement is more likely related to volatility than an emerging trend, it does believe the upward trend will continue and that prices should be higher when Boikarabelo delivers its first coal in early 2019.

The Boikarabelo project has a probable reserve of some 744.8-million tonnes, a measured resource of 1.1-billion tonnes, an indicated resource of 551.7-million tonnes and an inferred resource of 1.5-billion tonnes. The mine will be developed using a two-phased approach, with the first phase delivering about 14-million tonnes of run-of-mine coal a year, which will equate to about six-million tonnes of product coal. Phase 2, planned for 2022, involves ramping up production to 20-million tonnes of product thermal coal.

Resgen said that an extensive review of the mine design, mining options, construction and contracting options had enabled the company to significantly reduce the capital requirements for the mine development, and to avoid development and operating risks in the future.

Stefanutti Stocks Mining Services was last week selected at the preferred mining contractor for Boikarabelo.

IPP BIDDING

Meanwhile, Resgen welcomed the Department of Energy’s announcement of the successful bidders in first bid window of the country’s Coal Baseload Independent Power Producer Procurement Programme (CBIPPPP) and confirmed that it was considering participating in the second bid window.

Energy Minister Tina Joemat-Pettersson on Monday announced that the 557.3 MW Thabametsi project, in Limpopo, and the 306 MW Khanyisa project, in Mpumalanga, had been selected as the preferred bidders in bid window one. A second bid window will follow at a later stage when the balance of the 2 500 MW that the DoE aims to procure through the CBIPPPP will be allocated.