Resgen $539m deal delivers riposte to critics

[miningmx.com] – RESOURCE Generation (Resgen) has signed a €480m ($539m) agreement with a Swiss private equity firm to finance Boikarabelo, a thermal coal project in South Africa’s Limpopo province.

The agreement raises the prospect of ending a year of negotiations to fund the proposed 6 million tonnes/year (mtpa) mine, which included protracted talks with a club of bankers that included the firm’s shareholder Noble Group.

Crucially, the offer of finance – captured in a memorandum of understanding – can be withdrawn if there is a change of management at Resgen – effectively delivering a riposte to 10.7% shareholder, Shinto Torii, a subsidiary of Altius Investment Group, which wants Resgen’s executive board replaced with its own nominees.

“This is a great step forward for Resource Generation, our BEE partner, and all our shareholders, and we look forward to shareholders rejecting Altius’ attempt to change the board for the benefit of the debt club members,” said Resgen CEO, Paul Jury.

In terms of the MoU, signed by Resgen and Swiss private money, HAB & JPR Privee, in principle funding of €480m will be provided in two tranches of €175m ($196.5m) on or before 31 January 2016, and €305m ($342.6m) in June 2016.

“The cost of HAB & JPR Privee’s funding is the most attractive of the various sources that we have considered and materially more favourable than the incomplete proposals of the debt club involving Noble Group and Altius,” said Jury.

For its part, Noble on September 18 that it wanted to elect directors of its own to Resgen’s board in order to complete the finance. Noble also asked Resgen to consider a contract mining package – an avenue that Resgen said was not commercial.

Noble is a strategic partner for Resgen and a major backer for Boikarabelo having put up a $68m loan facility as well as another $55m loan to pay for construction of the rail link between the mine and the main Transnet railway line out of the Waterberg in South Africa’s Limpopo province.

Noble Group has a 7.5% in Resgen while Altius Investment Group, a South African firm, has 10.7%. Both were members of a club of bankers, that also included HSBC and the South African government-owned Industrial Development Corporation, with which Resgen was negotiating a $400m funding package, enough to take Boikarabelo to commercial production.

Altius successfully requisitioned a general meeting of Resgen’s shareholders, likely to be in November, in which it hopes to vote off all of Resgen’s executive directors, including Jury, and replace them with its own, including Lulamile Xate, a non-executive director of Altius and a renewable energy and forestry investor in his own right.

Xate told Miningmx on September 29 that the firm was concerned Resgen’s board was not representative enough and that there had been pressure from the South African government, Transnet and Eskom, to add a more South Africa flavour to management.

“We wanted to first expand the board so that management could understand all of the South African issues,” said Xate.

“The board is mostly Australian and Jury only visits the project for two days every month. But we saw our proposals were not going to be accepted so we have gone this route,” he said.

Said Jury: “We need to address the issues raised by Shinto Torii and its actions have not been conducive to progressing this funding option, which is clearly in the best interests of all shareholders”.