Resource Generation on-track developing a massive coal mine in South Africa

Energy resources company Resource Generation (ASX: RES) is on track to meet its goal of starting production in January 2013 at the Boikarabelo mine in the Waterberg region of South Africa. 

It says the key steps now are receipt of mining rights, obtaining project funding to begin construction, and completion of the mine development and infrastructure.

Managing Director Paul Jury said the company was increasingly excited by the potential of Boikarabelo to become a large, profitable coal mine and were always prepared to discuss the project with its shareholders.

Last week the company lodged the mining rights application for Resource Generation’s Boikarabelo mine in the Waterberg region of South Africa.

"This is an important step forward in our plans to develop a large-scale coal mining operation with production starting in January 2013," Mr Jury said.

"It is only 16 months since your company secured Boikarabelo prospecting rights, and since then we have made substantial progress."

The company had defined a 6 billion tonne coal resource; completed the mine plan, identified probable saleable reserves of 603 million tonnes from 23% of the company's available area, designed infrastructure, along with a variety of other measures.

The South African Department of Mines & Energy normally takes approximately 12 months to award mining rights. Meanwhile, Resource Generation will focus on securing coal offtake agreements, determining the most appropriate transport arrangements, and planning necessary infrastructure.

"We are also continuing our drilling program to prove even greater reserves and facilitate mine planning," Mr Jury said.

"By the time we receive the mining right, which we expect to be early in 2011, we hope to be well advanced in negotiating funding for the project.

"This would enable us to begin mine construction and order the mine fleet during 2011. The mine would then be completed and the mine fleet delivered in 2012."

Earlier this week, the company signed a purchase agreement to acquire more land for the company’s Boikarabelo mine.

The land covers two of the tenements contained in the Ledjadja prospecting right, Draai Om and Witkopje, and contains a significant portion of the mineable resource.

Coal is the major source of energy in South Africa. Production from existing mines is limited and there is expected to be an imbalance between supply and demand over the next ten years.

The Waterberg coal field contains approximately 40% of South Africa’s remaining coal resource and is considered to be the main source of coal in the future.

In addition, Asian demand for coal has been growing, providing export opportunities for South Africa which currently exports more than a quarter of its production.

Resource Generation also has five coal tenements in Tasmania which it is exploring and three uranium tenements in Cameroon. The company is planning a drilling program on one of its Tasmanian tenements with open-cut potential.