[miningmx.com] – RESOURCE Generation (Resgen), the Sydney- and Johannesburg-listed coal development firm, acknowledged talks for the R4.6bn ($400m) required to complete its Boikarabelo project were proving “protracted”.
It added, however, that discussions had not failed which indicated “… all parties seek to agree a structure that provides the funding”. Until then, Resgen has stopped development of the coal handling and preparation plant at the project, as well as other outstanding services except for construction of rail and bridges.
Discussions for the remainder of the finance for the mine have been underway since October at least. A year earlier, South Africa’s state-owned Public Investment Corp. took a one fifth stake in Resgen. In October 2013, the total capital cost of the mine was estimated at about R6.1bn or $530m.
The sense is that the next few months could prove pivotal for Resgen’s Boikarabelo project which is important for South Africa’s Waterberg coalfields in the Limpopo province as there’s been a lot of excitement about the region’s potential, but little delivery.
At the current time, Exxaro Resources is the only major producer of coal from the region identified as South Africa’s future source of thermal coal with some 40% of coal reserves located there.
Resgen’s financing difficulties, however, are entirely in keeping with poor market conditions for junior mining companies, and coal development firms in particular. The likes of Beacon Hill Resources has hit the wall while others, such as Coal of Africa have sought equity finance to stay afloat.
Resgen MD, Paul Jury, said in a December quarter report today that the firm’s loans with trader, Noble Group, could form part of a consortium that would fund the balance of the Boikarabelo project.
Noble Group is the counter party of several offtake agreements Resgen signed for its first phase 2.5 million tonne/year (mtpa) mine which it said underwrote most of the forecast revenue from stage one and a portion of stage two production.
Other offtake agreements had been signed with CESC and Valu Investments whilst a domestic offtake contract for 3mtpa of middlings coal had been signed with Noble Group for the first eight years of production at Boikarabelo.
