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
The Boikarabelo coal reserves were estimated at 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 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 what was then known as 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 the first deliveries of coal are now scheduled for the second half of 2022.

Latest Developments
Resgen has recorded changes to the common terms agreement for its mine funding package.

On December 5, 2019, the company announced that, along with its majority-owned subsidiary, Ledjadja Coal, it had executed principal binding agreements for the funding of the construction of the Boikarabelo coal project.

The project funding agreements include a senior facility, three mezzanine facility agreements, an equity contribution agreement, a common terms agreement, a comprehensive security package and certain other security agreements covering release, counter indemnity and subordination.

The common terms agreement includes several conditions precedent that require satisfaction, deferment or waiver prior to the project funding agreements completing, and Ledjadja Coal being able to issue the first drawdown notice (financial close).

The common terms agreement has a sunset date, which, until recently, was June 30.

A deed of amendment to the common terms agreement has been confirmed in principle by all lenders and is now at various stages of being formally executed under their governance processes, extending the sunset date to September 30.

This extension enables the company to reassess the target date for financial close, which currently requires the completion, satisfaction, deferment or waiver of several remaining key tasks. These include rail link funding, ramping-up working capital and yellow goods financing.

Moreover, Noble Group is making steady progress in its discussions with third parties to secure a back-to-back domestic offtake agreement for the domestic coal product to be produced at the mine.

This also includes logistics contracts, project costs and pricing reviews.

The company is also working towards having final lender investment committee approvals in place before the end of August, despite the sunset date having been extended to September 30.

The funding calendar has been updated based on what management believes are achievable timelines for addressing the key tasks set out above. On the basis of the updated funding calendar, the revised target for financial close is now the end of August.

Meanwhile, the company confirmed on June 19 that legal documentation had been finalised and executed for an additional working capital facility of $2.25-million in the form of an eighth deed of amendment to the facility agreement with Noble Group, dated March 3, 2014.

The additional working capital facility under the eighth deed had an availability period through to June 30, at which time only $250 000 had been received.

The company has been able to agree on amendments to the eighth deed, mainly the extension of the period of availability of the undrawn facility totalling $2-million to July 31, and the extension of the first date for repayment under the facility agreement to September 30 to align with the new sunset date agreed with the lenders. 

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, the ongoing operation and maintenance of the plant, and construction of the ancillary works pertaining to the infrastructure of the mine); 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).

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