resgen.com.au
Resource Generation (ASX: RES) is developing one of South Africa’s largest remaining coal deposits, with the company's focos on the Boikarabelo tenements, in the Waterberg region of South Africa.
The strategy for the company is to develop high grade “energy” related resources into viable and competitive mining operations. Accelerated shareholder value will be delivered through the delivery of physical mining activity.
Resource Generation first coal off take contract increased, additional funding secured
Resource Generation (ASX: RES) has signed a long term sales agreement with India’s RPG Group for the supply of thermal coal.
The coal will be sourced from the Boikarabelo mine in South Africa, with Resource Generation supplying 139 million tonnes, with purchases over 38 years, up from 20 years in the original contract signed in September 2010.
The initial off-take has increased to 73 million tonnes from 37 million tonnes, and will begin when the Boikarabelo mine commences production, which is currently scheduled for late 2013.
The balance of the additional off-take of 66 million tonnes will begin after the mine’s stage 2 expansion.
The price of each shipment will be based on the international market price at the time.
Resource Generation signed the off-take agreements with a subsidiary of RPG Group, Integrated Coal Mining.
Boikarabelo - Stage 2
The significance of Stage 2 at Boikarabelo is the mines development production increase to around 40 million tonnes per annum of run-of–mine coal.
Resource Generation said beneficiating this to maximise production of export quality coal will also generate an equivalent volume of domestic product.
RPG Group's flagship power company is the CESC, which is beginning a Feasibility Study for construction of a 2x660MW coal-fired power station adjacent to the Boikarabelo mine to supply power to the South African grid.
This proposed power station would use around half the additional domestic product, thereby underpinning plans to develop Stage 2 and maximise export coal production.
Additionally, Boikarabelo intends to install its own small-scale fluidised bed coal-powered power station at the mine site to supply power for mining operations.
Importantly, CESC has indicated it is prepared to assist with this project.
CESC invests in Resource Generation
A wholly-owned subsidiary of CESC, Bantal Singapore Pte Limited, has agreed to subscribe for just under 12.2 million shares at $0.82 in Resource Generation, providing a $10 million cash boost.
This represents around 4.8% of the company’s issued capital, and following this issue, RPG Group will have an interest of 11.6% in Resource Generation.
Paul Jury, managing director of Resource Generation, commented on the agreement "At a time when we are progressing discussions with Transnet for the transport of both stage 1 and stage 2 product and with Eskom over long-term coal supply, these developments help underwrite the expansion of our Boikarabelo mine and unlock its potential as a significant supplier of coal to both export and South African domestic markets.
"They represent a further vote of confidence by CESC in Boikarabelo’s future and position us to expand the mine earlier than otherwise may have been possible, providing positive returns to shareholders and benefiting the South African economy."
CESC is India’s third largest power utility.
