[miningmx.com] — RESOURCE Generation (Resgen, RSG), the Australian company planning to develop a coal mine in South Africa, on Tuesday said it had taken a step closer to establishing the Boikarabelo mine by securing its first coal off-take contract.
Resgen’s planned Boikarabelo mine is in the Waterberg region of South Africa, one of the country’s largest remaining coal deposits.
The company has signed a contract with Integrated Coal Mining, part of India’s RPG Group, whereby Integrated Coal Mining will purchase coal for 20 years from the Boikarabelo mine.
Integrated Coal Mining will also subscribe A$10.5m for a 10% shareholding in Resgen.
“This is a major step in our plan to establish our Boikarabelo mine as a significant supplier of coal to both export and South African domestic markets,” said Resgen MD Paul Jury.
Under the terms of the contract, Integrated Coal Mining, on behalf of its affiliated company CESC, will purchase one million tonnes of thermal coal per annum for three years and two million tonnes per annum for a further 17 years.
These purchases will begin when the Boikarabelo mine commences production, which currently is scheduled for early 2013, and the price will be agreed annually based on the international benchmark price at the time.
Jury said the deal was a vote of confidence in Boikarabelo’s potential and positioned the company to sell increasing quantities of coal as CESC’s generating capacity grows.
CESC is India’s third largest power utility, with a current installed generating capacity of 1,225 MW serving nearly 2.5 million consumers across the twin cities of Kolkata and Howrah.
Its published growth plan envisages an increase in its installed generating capacity to 5,745 MW.
Resgen has agreed to place 18,268,053 shares with Integrated Coal Mining at a share price of A$0.575.
The Boikarabelo mine, which could cost R4.5bn, lies close to where Eskom is constructing the Medupi power station as well as Eskom’s Matimba power station.
It is estimated that the mine will produce three million tonnes per annum of export quality coal and three million tonnes of domestic quality coal for the first five years from 2013.
The second stage from 2018 would increase production to 40 million tonnes of run-of-mine coal per annum.