Name of the Project
Boikarabelo coal project.

Location
Waterberg region in Limpopo, South Africa.

Client
Ledjadja Coal Limited (LCL), a subsidiary of Resource Generation (Resgen).

Project Description
Boikarabelo had total 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 that 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%.

Value
The estimated capital cost for the project is $300-million, or about R4.2-billion.

Duration
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 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
Resgen has agreed to accelerate discussions with the facilitator of alternative funding being sourced from a third party as a substitute or as a complementary participant in its lender syndicate.

This is owing to a short delay having arisen in scheduling the Credit Committee meeting surrounding the funding status of Resgen’s Boikarabelo coal mine.

Once approval has been received from the lender’s deal team Credit Committee, the lender’s proposal will be tabled for the board meeting for approval this month.

Earlier this year, in the quarterly activities report for the September quarter, Resgen advised that it had received an indication from the lender’s deal team that one of the lenders in the lending syndicate was still progressing credit approvals and that their Credit Committee submission would occur during the week of October 29.

It was further indicated that should the approval be secured, the proposal would then be tabled for their board approval at the meeting this month.

Subsequent discussions with the lender’s deal team have confirmed that this lender remains committed to the project from a technical, commercial and strategic perspective.

The Resgen board is seeking a clear acknowledgement of the lenders’ timeline to achieve Credit Committee and subsequent board approval, including the commitment to finalise all approval considerations before the Christmas break in South Africa.

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 (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.