JOHANNESBURG (miningweekly.com) – South-Africa focused Resgen, which is developing the Boikarabelo coal mine, is seeking quotes from mining contractors as it considers whether a contract-mining model would lower the mine’s costs and capital requirements.

The evaluation of the contract-mining model was at the request of a club of financiers, with which the ASX-listed company has been negotiating a potential multilayered funding package. The financiers were hoping that the adoption of a contract-mining model would lower gearing levels.

Although Resgen had in June been confident that it was close to signing an in-principle agreement with the club of financiers, it pointed out on Wednesday that the finalisation of negotiations had been hampered by a weakened API4 coal price forecast.

Resgen had been trying to secure $400-million in financing to complete the mine construction and related infrastructure for the past three years.

“The aim has been to fund construction through debt to avoid issuing additional equity and diluting shareholders’ interest in the project. This has proved to be difficult due to changing macroeconomic factors resulting in changes to the financiers’ requirements,” the company said in a statement. 

It noted that the evaluation of the contract-mining model could take several months to complete.

Resgen was, in the mean time, also exploring other sources of finance.

“With low production costs, transport arrangements in place and a number of years’ production already underwritten by sales contracts, Boikarabelo is well placed to benefit from any improved growth in global demand for coal.

“While weakness in the coal price forecast has delayed our securing the remaining finance to build the mine, we believe the asset is valuable and, once construction is financed on acceptable terms, will provide value to shareholders. Sufficient cash reserves exist for the company to operate in the medium term, while pursuing completion of the project funding,” said MD Paul Jury.