Name and Location
Boikarabelo coal project, Limpopo, South Africa.

Client
Resource Generation (ResGen).

Project Description
Boikarabelo has probable reserves of 745-million tons, a measured resource of 1.1-billion tons, an indicated resource of 551.7-million tons and an inferred resource of 1.5-billion tons.

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 in a two-phased approach to limit upfront capital expenditure. The first phase will deliver about 12-million tons of run-of-mine coal a year, which will equate to about six-million tons of product coal. Of this, three-million tons will be exported and three-million tons will be used domestically.

Phase 2, planned for 2018, will involve ramping up production to 20-million tons of product coal.

The project includes a 36 km rail link to the existing rail network.

Boikarabelo hosts a life-of-mine of up to 100 years.

Value
ResGen has reported that it will save about $120-million in construction costs at its Boikarabelo mine, after it secured electricity supply from the grid.

The estimated capital cost for the project has now been reduced to $630-million, reflecting the flexibility of State-owned power utility Eskom and its commitment to supply power to Stage 1 of the mine development as early as 2014.

Duration
ResGen’s black economic-empowerment subsidiary, Ledjadja Coal, received the Boikarabelo mining rights from the Department of Mineral Resources in April 2011.

Construction of the mine is scheduled to start by the first quarter of 2013 and will take about 24 months to complete.

The mine is expected to begin production in 2015.

Latest Developments
ResGen has entered into a 20-year export coal offtake agreement with Valu Investments, a special purpose vehicle that will be jointly owned by entrepreneur Jaimin Vyas and Indian energy infrastructure company IL&FS Energy Development Company.

Under the terms of the agreement, Valu will initially buy one-million tonnes of export coal a year from ResGen’s Boikarabelo mine. Once Stage 2 production at the mine is started, this volume will increase to two-million tonnes a year.

Coal prices will be according to an internationally recognised index at the time of each shipment.

Further, Valu has agreed to conduct feasibility studies for the proposed development of a 200 MW and a larger 1 200 MW coal-fired power station adjacent to the Boikarabelo mine.

ResGen has granted Valu the right to own, build and operate both coal-fired power stations as independent power projects.

Meanwhile, ResGen aims to raise A$62.6-million to start major construction work at the Boikarabelo mine.

The company will raise the funds through a nonrenounceable entitlement offer of about 284.7-million shares at A$0.22 a share.

Commitments have already been received from three independent parties – Barsington, Value Investments and Altius Investment Holdings – that are interested in taking up about 80% of the shares.

Further, ResGen is negotiating the offer of equipment finance, and the coal handling and preparation plant (CHPP) funding alternatives. It is in discussions with ten banks to augment the debt facility provided through the Noble Group.

Should the entitlement offer not achieve full subscription or take-up of the shortfall, the company plans to prioritise the expenditure in areas that provide maximum leverage in derisking project completion.

ResGen has also secured a $55.3-million loan with Noble Resources, a subsidiary of Noble Group, for the construction of the 38 km rail link from the Boikarabelo mine to the existing Transnet Freight Rail network.

Key Contracts and Suppliers
Digby Wells Environmental (mining right application, mine-waste licence, environmental authorisation process for power plant), RSV Enco (engineering, procurement and construction management for mine construction) and RCE (rail design and construction).

On Budget and on Time?
First production has been delayed to the first half of 2015.

Detailed mining and engineering plans have reduced the estimated first-stage cost of the mine to $630-million.

Contact Details for Project Information
ResGen (Australia), tel +61 2 9376 9000, fax +61 2 9376 9013 or email info@resgen.com.au; or (South Africa), tel +27 12 345 1057 or fax +27 86 539 3792.
Digby Wells Environmental, tel +27 11 789 9495 or +27 11 504 1400, fax +27 11 789 9498 or +27 11 504 1446, or email info@digbywells.co.za.
RSV Enco, tel +27 11 498 6010, fax + 27 11 498 6210 or email enco@rsvenco.com.
RCE, tel +27 12 450 0040 or fax +27 12 450 0060.