Resgen aligns coal project contracts to secure funding

JOHANNESBURG (miningweekly.com) – Engineering, procurement, construction and logistics contracts have been aligned to meet the debt funding requirements of the Boikarabelo coal mine project in Limpopo.

Boikarabelo, which hosts coal resources of 995-million tonnes and coal reserves of 267-million tonnes, with the first stage of mine development targeting saleable coal production of six-million tonnes a year, is being developed by Resource Generation (Resgen), the primary shareholders of which are the State-owned Public Investment Corporation of South Africa, Noble Group and Altius Investment Holdings.

An emerging ASX- and JSE-listed energy company, Resgen is currently developing Boikarabelo in South Africa’s Waterberg coalfield.

Resgen chairperson Denis Gately told shareholders in a Stock Exchange News Service notice on Thursday that by reaching agreement with supply contractors, the company is able to lock in the project costs and de-risk an important element of a final debt funding agreement, with full funding expected by mid-2017.

Port destination terms have been agreed with South Africa’s State-owned Transnet Freight Rail (TFR) for an envisaged Richards Bay export allocation of 3.6-million tonnes a year.
 
A viable all-export strategy is in place in the event of State electricity utility Eskom being unwilling to commit to an agreement within the required timeline.

“Either way, we intend to conclude these arrangements by end April 2017,” said Gately.
 
TFR is willing to partner with Resgen to raise R550-million to construct the necessary rail link and discussions are taking place with potential funders, which include the Development Bank of South Africa and the Industrial Development Corporation.

In parallel to advancing the development of the Boikarabelo coal mine, Resgen has provided another option for the domestic sale of coal in the form of operating as an independent power producer. Consultants J Maynard and Waterborne Capital have been appointed to assist the company with the selection of the main engineering, procurement and construction contractor.

At the same time, Regen is working to be ready to submit its proposal when the Department of Energy opens the next submission window, which is expected to be towards the end of 2017.
  
Meanwhile, Noble Resources is proposing to make more money available to Resgen subsidiary, Ledjadja Coal, until project funding is secured.

Ledjadja is a black economic empowerment subsidiary that operates under the Broad-based Black Economic Empowerment Act, Section 9(5) Codes of Good Practice.

The next board meeting is scheduled to take place on April 26, when more information will be provided.