Name of the Project
Boikarabelo coal project.

Location
Waterberg region in Limpopo, South Africa.

Client
Resource Generation (Resgen).

Project Description
The project has a 6.4-billion-tonne resource, with probable reserves of 744.8-million tonnes on 35% of the tenements under management and delineated to date.

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 reported that it would implement a revised mine plan at its Boikarabelo coal mine. This followed a technical review of the geological model by its technical committee comprising in-house and external experts, who suggested that the revised mine plan could achieve a better opportunity 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 will also implement 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. The first phase 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.

Phase 2, planned for 2022, will involve ramping up production to 12-million tonnes of product thermal coal.

The project includes a 48 km rail link to the existing rail network.

To expand the Boikarabelo project’s economic base, a bankable feasibility study on a 600 MW independent mine-mouth power station is being fast-tracked to operate as an approved independent power producer (IPP). Environmental and land use approvals have been obtained for a 300 MW IPP and are being revised to accommodate a 600 MW IPP.

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 $545-million.

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 is now expected to begin production in 2019.

Latest Developments
A proposed funding facility under negotiation is intended to provide the total funds required to complete the construction of Resgen’s Boikarabelo coal mine to the point of commissioning, the company has said.

However, this facility does not include the costs of building the rail link or the ramp-up to full production of coal.

“Those proposed lenders have completed their due diligence investigations of the project and the company, and are currently engaged in their respective internal credit approval processes,” Resgen has said.

Once those credit approvals have been obtained, the parties propose to execute term sheets recording the principal terms of the proposed funding.

The term sheets have been drafted based on negotiations between the proposed lenders and the company.

Although the credit approval processes are ongoing, Resgen is unable to forecast with any certainty when credit approvals and a signed terms sheet will be obtained from all proposed lenders, but that a further announcement will be made when that occurs.

Resgen has also received legal advice that this funding proposal will require the approval of shareholders. An independent expert, based in Australia, has been identified and will be appointed to prepare a report for shareholders in respect of the proposal when term sheets have been executed.

An extraordinary general meeting of shareholders will then be called to consider the funding proposal.

In conjunction with the funding proposal for the construction of the mine, the company is continuing to progress discussions regarding the funding of the rail link.

Ramp-up costs for the mine are estimated to be about R300-million. Management believes these funds can be raised when required from the commercial banks, as the project will have been substantially derisked at that point in time.
 
Key Contracts and Suppliers
Digby Wells Environmental (mining right application, mine-waste licence, environmental authorisation process for power plant); Sedgman (coal handling and processing plant and ancillary work packages); RCE (rail design and construction, EPC management services); NuWater (water EPCM services); EHL Energy (transmission lines), Stefanutti Stocks (preferred mining contractor), Stefanutti Stocks Road and Earthworks (rail earthworks and bridges), RNE (rail link) and Transnet Freight Rail (ballast, track and signaling).

On Budget and on Time?
First production has been delayed to 2019.

Contact Details for Project Information
Resgen, tel +27 12 345 1057, fax +27 12 345 or email info@resgen.com.au