Name of the Project
Boikarabelo coal project.

Location
Waterberg region in Limpopo, South Africa.

Project Owner/s
Ledjadja Coal Limited (LCL), a subsidiary of Resource Generation (Resgen).

Project Description
Boikarabelo had 2012 Joint Ore Reserves Committee-compliant resources of 3.45-billion tonnes and reserves of 267.1-million tonnes as at June 30, 2018.

The Boikarabelo coal seam is between 20 m and 30 m below the surface, allowing for low-cost, opencut mining. The seam is between 100 m and 120 m thick, with zones of varying-quality thermal and soft coking coal.

In February 2016, Resgen implemented a revised mine plan. This followed a technical review of the geological model by its technical committee comprising in-house and external experts, who suggested that the revised plan could achieve more than previously expected. The plan is based on selective mining and in-pit dumping to maximise productivity, reduce operating costs and minimise any environmental impact.

The company also implemented a project execution strategy, which transfers mine construction risk, through the appointment of a small number of reputable engineering, procurement and construction (EPC) contractors with substantial balance sheets, which will allow for recourse in the event of failure or delay.

The mine will be developed using a two-phased approach to limit upfront capital expenditure. Stage 1 will deliver about 15-million tonnes of run-of-mine coal a year, which will equate to about six-million tonnes of product coal. Of this, about 3.6-million tonnes will be exported and about 2.4-million tonnes will be used domestically.

Stage 2 will involve ramping up production to 12-million tonnes of product thermal coal. It is estimated that fully funded Phase 2 construction and production will not begin before 2025.

The project includes a 44 km rail link to the existing rail network.

To expand the Boikarabelo project’s economic base, a bankable feasibility study on a potential 300 MW independent mine-mouth power station will be completed once the Boikarabelo mine has been commissioned.
 
Potential Job Creation
The project is expected to create 2 500 jobs in the construction phase and 709 full-time jobs.

Net Present Value/Internal Rate of Return
The project has an internal rate of return of 17%.

Capital Expenditure
The estimated capital cost for the project is $300-million.

Planned Start/End Date
LCL 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 was scheduled for completion in September 2018. However, the mine’s expected date of first coal production has been delayed and it is now expected to begin production in 2021.

Latest Developments
State-owned freight logistics group Transnet has signed a ten-year take-or-pay coal transport agreement with ResGen subsidiary Ledjadja Coal, improving prospects for the development of a new greenfield coal mine.

Under the contract, which is valued at R10-billion, Transnet will haul 3.6-million tons of export coal yearly from the proposed Boikarabelo greenfield mine to Grindrod’s private Richards Bay Terminal, in KwaZulu-Natal. Should all the outstanding conditions be fulfilled, the contract will become operational on June 1, 2022.

ResGen interim CEO Papi Molotsane is confident that Ledjadja will be in a position to announce financial close on the Boikarabelo project in early 2020.

Besides the logistics contract with Transnet, some of the other main outstanding conditions set by the funding syndicate are the conclusion of a separate three-million-ton-a-year coal-supply agreement with State-owned power utility Eskom securing a port allocation agreement for the coal exports and securing funding for the construction of a 44-km-long rail link from the new mine to Transnet’s main line.

Molotsane has emphasised that coal offtake agreements have been concluded, indicating that the bulk of the coal will be supplied to consumers in Asia, including India.

Molotsane is also “relaxed” about prospects for the coal export market, despite warnings that demand for South African coal could fall, as India, currently the dominant consumer of South African coal, invests in domestic coal production and scales up its renewables investments.

Transnet Freight Rail acting CEO Lloyd Tobias has said that the contract, together with other coal-related investments in the Waterberg region of Limpopo, will require further investments by Transnet of about R5-billion, which will be pursued in phases.

Tobias has said that the initial phases will raise the export-coal capacity from the Waterberg to 9.5-million tons, while further phases will raise the capacity to 13.8-million by March 2021.

He has said that there will be sufficient rail capacity for Ledjadja and other miners, such as Exxaro, and work is also under way to assess prospects for added exports from Botswana, which could raise exports on the network to more than 24-million.

Transnet chief customer officer Mike Fanucchi has said that the contracts signed with coal miners in Limpopo are aligned with government’s Strategic Infrastructure Projects 1, or SIP 1, which aims to unlock the country’s northern minerals belt.

Key Contracts and Suppliers
Digby Wells Environmental (mining right application, mine-waste licence, environmental authorisation process for power plant); Sedgman (design, engineering, procurement and construction contract for the coal handling preparation plant, as well as for the ongoing operation and maintenance of the plant); RCE (rail design and construction, engineering, procurement and construction management, or EPCM, services); NuWater (water EPCM services); EHL Energy (transmission lines), Stefanutti Stocks (preferred mining contractor), Stefanutti Stocks Road and Earthworks (rail earthworks and bridges) and Transnet Freight Rail (ballast, track and signalling).

On Budget and on Time?
First production has been delayed to 2021.

Contact Details for Project Information
Resgen, tel +27 11 010 6310, fax +27 86 539 3792 or email info@resgen.com.au.