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

Client
Resource Generation (Resgen).

Project Description
Boikarabelo has probable reserves of 744.8-million tonnes, a measured resource of 1.1-billion tonnes, an indicated resource of 551.7-million tonnes and an inferred resource of 1.5-billion tonnes.

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 using a two-phased approach to limit upfront capital expenditure. The first phase will deliver about 14-million tonnes of run-of-mine coal a year, which will equate to about six-million tonnes of product coal. Of this, three-million tonnes will be exported and three-million tonnes will be used domestically.

Phase 2, planned for 2022, will involve ramping up production to 20-million tonnes of product thermal coal.

The project includes a 40 km rail link to the existing rail network.

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

Net Present Value/Internal Rate of Return
Not stated.

Value
The estimated capital cost for the project is $480-million.

Duration
Resgen 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 is scheduled for completion in the second half of 2017.

The mine is expected to begin production in late 2017.

Latest Developments
Resgen has rejected a request by funding partner the Noble Group to appoint additional directors to the boards of the company and its black economic-empowerment subsidiary Ledjadja Coal, citing Noble’s inability to elucidate how these board additions will benefit shareholders or the operations of the company.

The miner entered into a strategic partnership with Noble in 2013, which resulted in the placement of more than 21.3-million shares, at 40c a share, to raise A$8.5-million to fund development of the Boikarabelo coal project.

However, Noble has announced that it is reaching a “critical juncture”, with regard to debt funding and construction of the project.

Noble has claimed that there are “significant” issues in relation to continuing debt support for this project by the Export Finance and Insurance Corporation and Danish export credit agency EKF, whose participation Noble considers as critically important to its procuring the necessary funding.

The group further has cautioned that it will “pursue other alternatives” should the appointment of additional directors not have materialised by September 25.

Resgen has countered that it has the required expertise and has appointed external consultants to assist with the challenges experienced at Boikarabelo.

Moreover, the company has added that, as announced on August 19 and at the request of Noble on behalf of a club of lenders with which the company has been negotiating debt finance, Resgen is seeking quotes from mining contractors to establish whether a contract-mining model could reduce the mine’s costs and capital requirement.

“Noble, as part of one club of lenders, is already actively involved in the structuring and negotiation of the terms and conditions of the facilities proposed by that club, which remain incomplete and subject to negotiation and agreement among the parties.

“Terms and conditions put forward to date by the club have not been acceptable to the company owing to the excessive returns sought by some of the club members, including Noble. There is no benefit to the company in having Noble nominees on the board in this situation,” Resgen has contended.

The company is also continuing discussions with intermediaries regarding various other potential lenders for loan facilities for the Boikarabelo coal project, as previously announced.

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, or EPCM, for mine construction); FLSmidth Roymec (coal handling and preparation plant); RCE (rail design and construction); Ceenex (water EPCM services), Komatsu Financial Limited Partnership (mobile equipment fleet); and EHL Energy (transmission lines).

On Budget and on Time?
First production has been delayed to late in 2017.

Detailed mining and engineering plans, together with the results of tenders, support the estimated first-stage cost of the mine of $480-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 12 345 5314.
Boikarabelo mine site, tel +27 14 944 0199.
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.
FLSmidth Roymec, tel  +27 10 210 4000 or fax +27 10 210 4050.
Ceenex, tel +27 12 347 2620.
Komatsu Financial Limited Partnership, tel +1 888 500 6001 or fax +1 847 437 3199.
EHL Energy, tel +27 11 370 7400 or fax +27 11 834 4203.