[miningmx.com] — AUSTRALIA’s Resource Generation (ResGen) eased its coal haulage woes from its proposed Boikarabelo mine in the Limpopo province signing a memorandum of understanding (MoU) with Transnet SOC freight unit, Transnet Freight Rail (TRF).
In terms of the MoU, TFR has agreed to haul on a take-or-pay basis some 4 million tons (Mt) 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.
However, the agreement has a number of loose ends that means ResGen is unable to raise finance against the MoU.
“Whilst it is a binding agreement, its conditionality prevents it from triggering a move to project funding,” said Paul Jury, MD of ResGen. “We will be making every effort in the next few months to finalise the contract which will be necessary to complete the funding required to develop the Boikarabelo mine.
Some of the conditions include finalising freight rates that ResGen said would be “commercially fair and reasonable”; developing the Boikarabelo mine so that production would commence in 2014, and upgrading the existing coal line between Lephalale and Pyramid South. ResGen has offered to undertake the upgrade of this part of the rail, which were considered “minor”, if Transnet agreed, it said. The rail link would be a common user facility.
Completion of the rail link between Boikarabelo and the existing rail network was also necessary, ResGen said. This development was part of the capital required to build Boikarabelo – estimated at $750m including installation of a 40MW power station – and would be handed over to TFR although compensation was still to be negotiated.
“It is pleasing that we have been able to complete this first step in working with Transnet to open up the Waterberg coalfields,” Jury said in a statement. He declined to provide more details.
The MoU was also contingent on TFR completing its Waterberg Feasibility Study which is aimed at unlocking a potential haulage capacity of 22.5Mt/year from the Waterberg, and formal allocation of capacity by TFR.
The MoU, while highly conditional, will come as a relief to ResGen which last month said production from Boikarabelo would be delayed as TFR could not guarantee it any haulage capacity.
ResGen also has lucrative marketing agreements to meet. In June, the company signed a $16bn coal agreement with India’s Integrated Coal Mining, a unit of the RPG Group, for the supply of some 139Mt of coal from Boikarabelo.
The mine is expected to supply 73Mt over the life of its first phase. The second phase will supply the balance of 66Mt to RPG.
