[miningmx.com] – RESOURCE Generation (Resgen) the Johannesburg- and Sydney-listed coal development firm, has secured funding that will enable it to begin building its proposed Boikarabelo thermal coal mine in South Africa’s Limpopo province.
The company said in an announcement today that it had issued 7.5% of its shares for 40 Australian cents/share to Singapore trading company, Noble Group, raising $8.5m. Noble Group already has $20m in secured debentures that may convert to equity in Resgen.
Shares in Resgen gained 11% or some three Australian cents, and closed on the Australian Stock Exchange closing at 29c/share.
In addition, Noble Group will provide loan finance which Resgen said was on “normal commercial terms” for some $123m. The facility can be drawn down until December with repayment falling due 21 months after first drawn-down.
In return, Noble establishes a firm grip over Resgen’s production from Boikarabelo, a mine that will cost an estimated $750m to build, capital expenditure that includes construction of a 40MW power installation.
Instead of 2.5 million tonnes a year (Mtpa) in thermal coal supply spread over five years, Noble will now have access to 500,000 tonnes a year in the first eight years, increasing to 1.5Mtpa from years nine to 12; 2Mtpa from years 13 to 14 and 2.5Mtpa from years 15 to 35. The coal will be sold as per the indexed price at the time.
In addition, Resgen has entered into an exclusive supply chain management and marketing agreement in terms of which Noble Group will manage the supply chain and marketing of Boikarabelo’s domestic and export sales for 35 years.
In terms of a memorandum of understanding signed with Transnet Freight Rail (TFR) in October 2011, the state-owned freight and logistics provider agreed to haul on a take-or-pay basis some 4Mt of coal starting July 1, 2014 and increasing to 5Mt and 6Mt on anniversary in the two subsequent years.
Half of the railed coal would be destined for export with the other half to be provided to Eskom power stations in Mpumalanga province.
The financing package with Noble Group comes after Resgen failed to agree a loan agreement with a syndicate of banks.
“This agreement gives Resource Generation a strong strategic partner as we continue with the construction of Boikarabelo’s infrastructure,” said Paul Jury, MD of Resgen.
“Noble Group’s investment and loan facility and its increased off-take commitment
demonstrate the group’s confidence in the mine’s potential,” he said.
“They also provide a platform for continuing to secure additional funding for the project,” he added.
