JOHANNESBURG (miningweekly.com) – ASX- and JSE-listed Resource Generation (Resgen) is working on securing an alternative funding source – not linked to committed domestic coal supply – for the development of its Boikarabelo coal mine.

In a shareholder update published Friday, Resgen explained that considerable progress had been made in finalising all material contracts and funding of the rail link; however, the terms of the proposed coal supply to State-owned power utility Eskom had not been secured.

This followed the wrapping up of items, identified during an all-party meeting in June, that needed to be dealt with or produced for the lenders to start their respective credit approval processes.

Resgen pointed out that, while all the other outstanding issues had been dealt with, the frequent management changes at Eskom in recent months have not made it possible to continuously engage with management on the terms of an unsolicited bid for the supply of coal outside of Eskom’s scheduled tender process.

According to the company, Eskom would not start a public tender process for the supply of coal from the Waterberg region until 2019.

“We have engaged and will continue to engage with them on the basis of them accepting an unsolicited bid,” said Resgen.

“In the circumstances, the board believed it would be reasonable to ask the debt club lenders to undertake their credit approval process to a conclusion, but on the basis that any drawdown of senior debt be subject to a concluded coal supply agreement being in place,” added the company.

Some members declined, requiring a greater degree of certainty around the terms of supply, which means that this source of project finance is no longer viable.

“Mindful of the present difficulties in securing terms of supply with Eskom, management had, in parallel, been exploring an alternative funding proposal that is not subject to a committed domestic coal supply,” the company said, adding that the credit approval processes of these lenders had started.

The first approvals and a signed term sheet are expected by the end of September or early in October.