JOHANNESBURG – Resource Generation’s (Resgen) new board has said its top priority is to secure funding for the development of its main asset, the Boikarabelo coal mine.
Difficulties in raising the $400m debt funding required to build the Waterberg mine led to a public showdown between shareholders of the ASX- and JSE-listed company and its former board in September 2015. Shareholders have since approved the election of a new board, who in turn appointed Rob Lowe, the CEO of Resgen shareholder Altius Investment Holdings, as interim CEO in November 2015.
Lowe told Mineweb that meetings with funders, which began the day after he was appointed, got off to ‘a fast start’ this year. While the company is exploring all potential financing options, he said a deal with ‘the debt club’, a consortium comprising HSBC, Rand Merchant Bank, the Industrial Development Corporation, the Public Investment Corporation and Resgen shareholder Noble Group has the most traction. “The strategic realignment of the business in South Africa and the South African-based board are well received,” he said by telephone. Credit approved term sheets are expected in July or August, and the deal should close shortly after that.
In spite of the corporate upheaval, the final stages of early construction work at Boikarabelo continued during the three months to December 31, 2015. “Focus on the mine has now shifted from construction to operational readiness as the early works construction comes to an end,” Resgen said in an operational update dated January 27.
According to the company, construction of a bulk transformer yard and substation – separately funded by a deferred payment facility – has been commissioned, with connection to the Eskom power grid expected in July 2016. It also commissioned switching and signalling stations as well as the construction of the 400 metre permanent way of its rail network stabilisation facility (NSF) or control system.
“The NSF is now in a position to be used as the construction access for the rest of the railway line system to the mine,” Resgen said. It is targeting saleable coal production of 6Mt per year in the first phase of the mine’s development. Lowe said first coal production from the mine would depend on the progress of the debt funding negotiations and is currently expected in the third or fourth quarter of 2018.
A Mining Right Application for Kubu, adjacent to Boikarabelo, is believed to be under review by the Department of Mineral Resources, and Resgen expects to lodge an environmental impact assessment this quarter.
Cash reserves as at December 31, 2015, stood at AUD $18.3m.
Resgen is seeking legal advice regarding termination benefit payments in excess of AUD $2.3m paid to former board members, executives and staff in November. These benefits were approved by former board members and paid out on the same day, a day prior to the company’s general meeting at which a new board was elected.