RESOURCE Generation (Resgen), the Johannesburg- and Sydney-listed coal development company, said it had secured R5.52bn (A$515m) in finance to complete construction of the 12 million tonne/year (mtpa) Boikarabelo project in Limpopo province.
Rob Lowe, CEO of Resgen, said the finance was subject to credit approval by members of a financing syndicate consisting of Rand Merchant Bank, Noble Resources, the trading group, and the South African government-owned Industrial Development Corporation (IDC) and the Public Investment Corporation (PIC).
“This is an extremely important milestone towards the construction and commissioning of the Boikarabelo mine, which will be the second largest in the Waterberg region and will have a marked impact on the opening up of the Waterberg coalfield,” said Lowe in a statement.
The finance was been secured with Ledjadja Coal, Resgen’s black economic empowerment (BEE) subsidiary.
Construction totalling US$200m in capital has already been completed, but funding for the $400m balance stopped dead about two years ago – a development that led to an ouster of Resgen’s then predominantly Australian board.
Lowe said in an interview with Miningmx that it was necessary to import more local knowledge to the board and lend the project fresh momentum. “I only have respect for Paul [Jury, former MD of Resgen]; there is no animosity, there was just disagreement on the commercialisation of the project,” said Lowe.
“The Australian focus was not aligned with the local funders,” said Lowe. “We could not amend the project plan to meet local requirements. And as the coal price fell, the debt capacity was also falling. But management was reluctant to adjust the project make-up,” he said.
As part of securing the finance, Lowe’s Resgen updated and changed the mining plan and execution strategy. “We want to embrace the innovations of the Australians in the new mining plan which substantially reduces the operating cost, improves productivity and is environmentally friendly by allowing for in-pit dumping of discard,” said Lowe.
“This removes the cost of hauling the discard to a dump; in fact, outpit dumping of discard is reduced by 70%,” he said.
Crucial to securing the term sheet on the finance was derisking the project. Lowe said Sedgman is the single EPC contractor with a single mining contractor due to be appointed shortly. Lowe said he wanted as few interfaces as possible to reduce friction and improve decision-making for the project.
Capital on the project had also been reduced after Sedgman agreed to a lump sum payment of $141m compared to the previously announced estimate of $200m.
Whilst Boikarabelo is 60% configured to export coal, the plant could be adjusted to allow for more domestic supply with Lowe working on making a market for Noble Group which initially funded Resgen in return for an offtake of product. Eskom was the likely buyer.
There are also plans to establish Resgen as an independent power producer (IPP) in South Africa. “Running parallel with this is the IPP. We have to be ready to participate in the second window of the coal-fired IPP,” said Lowe referring to the South African government’s plans to attract 2,500MW of power from coal-fired projects in a number of bidding windows.
The second window could be open this time next year.
Credit approval and financial close is targeted by end October 2016. “On this basis construction of the mine is to be completed by September 2018, with first saleable production in the last quarter of 2018,” Resgen said.
Although the mine could start with run of mine of 12 million tonnes/year, it may be able to ramp up to 25Mtpa in five phases.