Name of the Project
Boikarabelo coal project.

Location
Limpopo, South Africa.

Client
Resource Generation (Resgen).

Project Description
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 company also plans to implement a strategy to reduce capital costs and minimise risk by appointing a suitably qualified contract miner. Sedgman has been appointed the coal handling processing plant (CHPP) contractor.

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.

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 12-million tonnes of product thermal coal.

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

Jobs to be Created
The project is expected to create 2500 jobs in the construction phase and 709 full-time jobs.

Net Present Value/Internal Rate of Return
The project has an internal rate (IRR) of return of 17%.

Value
The estimated capital cost for the project is $545-million.

Duration
Resgen black economic-empowerment (BEE) 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.

The mine’s expected date of first coal production has been delayed and is now expected to begin production in 2019.

Latest Developments
As work continues at the Boikarabelo coal mine, Resgen is considering a proposal to increase an existing unsecured loan facility.

The provider of the three-year-old facility, which is now fully drawn down, has offered Resgen an increase in the facility to provide the company with additional working capital for the period up to the first drawdown under the proposed project funding arrangements, the company has said in an update to shareholders.

“The company expects to finalise its consideration of the proposed increase during February and will update the market when this occurs,” Resgen has noted.

Work continued at Boikarabelo during the quarter to December to ensure project readiness for the mobilisation of the engineering, procurement and construction contractors.

“In parallel, significant progress has been made towards completion of the material contracts with Transnet Freight Rail (logistics), Sedgman (the coal-handling and preparation plant and operation and maintenance contracts) and Stefanutti Stocks Mining Services (mining contract), besides others,” Resgen has said.

The contracts remain subject to conditions precedent to the financial close of funding with the financing syndicate.

“The completion of the project funding continues to be the company’s highest priority,” Resgen concluded.
Meanwhile, a recent update to the resources and reserves estimates that the Boikarabelo coal mine has increased its measured and indicated tonnes to 994.81-million tonnes, up from the previous 664.2-million tonnes.

Its marketable coal reserves, however, have decreased from 430.6-million tonnes to 267.09-million tonnes, based on an export-quality product with an average of 14% ash and an average 25.73 MJ/kg calorific value determined on an air-dried (AD) basis and a domestic power station product with an average of 31.43% ash and an average 19.5 MJ/kg calorific value determined on an AD basis.

The company has noted that its export/domestic business model has also resulted in a meaningful increase in the net present value and an IRR of the project, with the previously announced 2010 estimated coal resources and coal reserves being based on a low-quality product for sale to domestic power stations.

Its new business model has resulted in the export-quality product having an average yield of 23.68% and the domestic power station product having an average yield of 19.61%.

This equates to an overall average yield of 43.3%.

The run of mine of 616.85-million tonnes equates to a life-of-mine of more than 40 years at a yearly production rate of 15.12-million tonnes and sales for a similar period at a rate of 6.55-million tonnes a year – the company’s production target.

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); Sedgman (CHPP); RCE (rail design and construction); NuWater (water EPCM services);EHL Energy (transmission lines), Stefanutti & Stocks (preferred mining contractor).

On Budget and on Time?
First production has been delayed to late 2018.

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