JOHANNESBURG (miningweekly.com) - ASX- and JSE-listed Resource Generation (Resgen) MD Paul Jury on Friday said the $20-million received through a debenture with Noble Resources would be used to start construction at its Boikarabelo coal project, in Limpopo, in February.

In a report on the company’s progress during the three months ended December 2012, Resgen indicated that it had, earlier this month, issued a secured debenture to Noble Resources and that the funds, which were received on January 8, were repayable in December.

Resgen stated that the fundraising had been necessary, owing to a delay in the completion of the project debt finance from the company’s initial expectations.

The company also entered a third coal offtake contract with Noble for the supply of 2.5-million tons of coal from the mine over a five-year period. Coal prices would be set by reference to an internationally recognised index at the time of each shipment.

Resgen further said it had finalised the optimal solution for coal handling and the preparation plant at the mine, from a functional and cost perspective, and that this was being incorporated into the mine design.

At the start of the quarter, Resgen awarded a mandate to six South African and global banks, as well as other financiers to provide project debt finance for the construction of the Boikarabelo mine.

The financiers were Absa Capital, Caterpillar Financial Services, Rand Merchant Bank, Hong Kong & Shanghai Banking Corporation, Nedbank Capital and Standard Chartered Bank.

Resgen stated that a credit-submissible terms sheet was agreed with the financing syndicate at the end of the quarter and that the financiers were processing their credit submissions to obtain formal credit approvals for the facility.

However, Jury pointed out that there had been a delay in proceeding to the financiers’ credit processes in the last quarter of 2012 and that it was now targeted for receipt by the end of February.

Assuming credit approval for the debt funding is obtained, the company would proceed with an equity raising for the balance of the funds needed to develop the mine.

“We then approach the equity market for the balance of the funds. At this stage of the game, we anticipate about one-half of the capex [capital expenditure] of the project will be covered by the debt and, therefore, we will be going to the equity market for the remaining half,” Jury said.

Resgen would spend about $630-million on developing the mine.

However, the terms of the equity raising and participants in the raising were still to be determined.

Meanwhile, Resgen signed a port access contract with Bulk Connections, which operates a multipurpose terminal at the Port of Durban, in November.

Under the contract, Bulk Connections would allocate Boikarabelo sufficient stockpile capacity to ship coal at least once a week, enabling the company to meet its Stage 1 export target of six-million tons from early 2015.