In June, Australian coal company Resource Generation (Resgen) announced that negotiations between itself and a group of potential financiers regarding project finance for development of its Boikarabelo coal project in Limpopo are continuing.

The company said that the process to reach an agreed term sheet has been protracted, owing to several factors, including the variable nature of the envisaged loan structure and maintaining deliverable outcomes within prevailing debt and coal markets.

Resgen in February stated that it was in negotiations with FirstRand Bank, acting through its Rand Merchant Bank division; HSBC Bank – Johannesburg Branch, the Industrial Development Corporation, Noble Resources International and Export Finance & Insurance Corporation regarding a financing facility for the construction of the $480-million Boikarabelo mine.

Resgen has reiterated that it expects the project financing, if concluded, to provide all the required remaining funding for the mine’s construction and that the company does not envisage raising further equity. The company continues, however, to explore alternative funding arrangements.

Boikarabelo has probable reserves of 744.8-million tonnes, a measured resource of 1.1-billion tonnes, an indicated resource of 551.7-million tonnes and an inferred resource of 1.5-billion tonnes.

The Boikarabelo coal seam is between 20 m and 30 m below surface, enabling low-cost opencut mining. The seam is between 120 m and 130 m thick, with zones of varying-quality thermal and soft coking coal.

The mine will be developed using a two-phased approach to limit upfront capital expenditure. The first phase will deliver about 14-million tonnes of run-of-mine coal a year, which will equate to about six-million tonnes of product coal.

Of this, three-million tonnes will be exported and three-million tonnes will be used domestically. Phase 2, planned for 2022, will involve ramping up production to 20-million tonnes of product thermal coal.

The project includes a 40 km rail link to the existing rail network. Boikarabelo hosts a life-of-mine of up to 100 years.

The estimated capital cost for the project is $480-million.

Resgen’s black economic- empowerment subsidiary, Ledjadja Coal, received the Boikarabelo mining rights from the Department of Mineral Resources in April 2011. Initial construction of the mine started in the first quarter of 2013 and is scheduled for completion in the first half of 2017. The mine is expected to begin production in mid-2017.

Key contracts and suppliers include environmental and social services provider Digby Wells Environmental, which will be responsible for the mining right application, mine-waste licensing and the environmental authorisation process for the power plant.

Mine engineer RSV Enco has been contracted to conduct the engineering, procurement and construction management of the mine.