RESOURCE Generation (Resgen), the Johannesburg- and Sydney-listed coal development firm, edged closer to securing more than $400m in capital funding for its six million tonne/year (mtpa) Boikarabelo project in South Africa’s Limpopo province.
The group today announced it had signed a letter of intent with Sedgman Limited, a engineering, procurement and construction company specialising in coal projects for a $141m (R2.1bn) contract. The agreement helped de-risk the project as Resgen seeks finalisation of funding, the company said.
The contract price was a substantial saving over the previously announced estimate and was achieved as a result of the Sedgman design offering a smaller footprint with associated capital savings while offering equal, if not improved, production outputs, said Resgen.
“The conclusion of the EPC contract with a leading contractor based on the significantly reduced capital cost of the project is a major milestone for the Boikarabelo Mine and ResGen, and is a step closer to securing full funding for its completion,” said Rob Lowe, CEO of Resgen in a statement.
“The board has continued on its stated path of materially reducing risk and capital expenditure,” he added. Lowe was appointed CEO of Resgen in February after a tumultuous year in which the former CEO, Paul Jury, and his board were ousted by shareholders who lost patience with project progress.
The letter of intent is for the design, procurement and construction of the Coal Handling and Preparation Plant (CHPP) for the Boikarabelo mine. The letter also allows for negotiation of a three-year CHPP operations contract with Sedgman following the expiry of a 15-month operations contract.
This would cover the warranty period post commissioning and to negotiate with Sedgman a contract for the construction of the ancillary infrastructure works, said Resgen.
Boikarabelo was originally designed to produce export quality coal with shareholder, Noble Group, signing an offtake agreement in return for project funding.
However, Lowe also wants to consider the merits of mining coal for independent power production. It is thought that the company is exploring this option with Sibanye Gold, a company that wants to de-risk its own energy supply by becoming an investor in a coal producer.
As for the export market, Boikarabelo could be expanded to produce over 20mtpa in its second phase. This is based on studies by the company’s previous management. Probable reserves at Boikarabelo have been estimated at 744.8 million tonnes of coal on 35% of the tenements under the company’s control.
