Johannesburg - The future looks bright for junior coal mining firm, Resource Generation (Resgen). It announced on Monday that it had secured R5.52 billion in funding to complete the construction of its Boikarabelo coal mine in Limpopo.
The funding is an important step in the realisation of a new coal mine in the Waterberg, and moves the Boikarabelo mine one step closer to construction and commissioning.
Chief executive Rob Lowe said the funding was on condition of approval by a “financing syndicate”, including FirstRand Bank, Industrial Development Corporation, Public Investment Corporation and Noble Resources International.
The JSE and Australian Securities Exchange-listed company’s empowerment subsidiary, Ledjadja Coal, is responsible for developing the Boikarabelo mine, which produces 6 million tons of saleable coal a year and is expected to bring some 3 000 jobs to the area during the construction phase.
Milestone
“This is an extremely important milestone towards the construction and commissioning of the mine, which will be the second largest in the Waterberg region and will have a marked impact on the opening up of the Waterberg coalfield,” Lowe said.
Resgen said it was eyeing credit approval by the end of October and this would signal the construction phase, which was expected to be complete by September 2018.
The first saleable production was expected in the last quarter of 2018.
The R5.52bn it has secured is expected to provide the remainder of total funds required to complete the construction of the mine and the necessary headroom for contingencies.
The company’s previous target was to begin production in mid-2016, subject to securing debt funding of $500 million (R7bn) to complete construction and buy mobile equipment. The first tranche of this finance was secured in August 2014, when a loan facility for up to $113m with Komatsu Financial was signed for the cost of the mobile equipment fleet.
However, negotiations for the remaining $400m were hampered by a weak coal price forecast, which prompted the financiers to request an investigation on whether a contract mining model could reduce the mine’s cost.
As part of securing funds, Resgen has adopted a new strategy for the mine, following a review by a technical committee at the end of last year.
BUSINESS REPORT