Boikarabelo Coal Mine

From Global Energy Monitor
This article is part of the Global Coal Mine Tracker, a project of Global Energy Monitor.
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The Boikarabelo coal mine is a proposed coal mine, owned by Resgen South Africa, a subsidiary of Resource Generation (Australia), to produce 6 million tonnes per annum, for the Boikarabelo power station, in Resgen, Limpopo, South Africa.

After more than a decade in development, the project is delayed logistically and financially. Resgen's capacity to develop the mine has been thrown into doubt.

Location

The image below shows the approximate location of the mine.

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Background

Mining at the Boikarabelo mine was scheduled for late 2013.[1] However, as of January 2014 the company was still working to secure financing for the mine portion of the project.[2][3] In February 2015 ResGen said that its Boikarabelo mine had been delayed by three to six months as the company’s main earthworks contractor, Protech Kuthele, went into liquidation in early July 2014.[4]

In September 2015 ResGen said it received funding for construction of the mine from HAB & JPR Privée, a Swiss private company.[5] The mine is estimated at US$480 million, and the coal handling and preparation plant at US$200 million.[6] The technical review of the mining project concluded in February 2016. In May 2016 Resgen signed a letter of intent for for US$141 million with engineering firm Sedgman Limited for the design, procurement and construction of the coal handling and preparation plant.[7]

In March 2017 Resgen signed an extension of its facility agreement with Noble Resources for up to US$8.4 million for the Boikarabelo mine. Due to the delay of funding, Resgen expects the first coal from the mine to be produced in the first quarter of 2019.

In December 2017, Resgen agreed to offer to sell to international commodity group Noble Resources a committed volume of 800,000t of coal annually for years one to three of the “uncontracted tonnage offtake agreement” plus up to another 300,000t/year on a quarterly basis. Noble is a 13% equity owner of Resgen. In November, Resgen chairman Denis Gately was replaced by Lulamile Xate. Gately said, “The last financial year, and the five months since, has not been easy. The company has been able to survive financially thanks solely to support provided by Noble, one of its significant shareholders and a longstanding and committed supporter of the Boikarabelo project.”[8]

As of April 2018 the project is still struggling to secure financing, and the energy economics group IEEFA believes the project is unlikely to take off:[9]

"The project’s original lending consortium, in negotiation with ResGen for two years, pulled out of the project in 2017 because an offtake agreement with Eskom for 40 percent of the mine’s output could not be reached. Subsidized funding from Australia’s export credit agency, Efic, is now said to be off the table. That leaves the company negotiating now with a new consortium in hopes of reaching financial close this quarter. But that will get ResGen only part way to where it needs to be: the talks do not cover funding for a required rail link or for ramp-up costs after the mine is commissioned. While it attempts to secure financing, ResGen is relying on a continuing working capital facility from one of its major shareholders, Noble Resources, with which it also has a coal offtake agreement. This does little to brighten the projects outlook, however, given Noble Group’s own current financial crisis."

In September 2018 it was reported that coal production from Boikarabelo was expected to start in the first quarter of 2019 and reach 1.26Mt a month from December 2019. Resource Generation (Resgen) is developing the project through Ledjadja Coal, a Black Economic Empowerment (BEE) subsidiary. Resgen holds a 74% stake in Ledjadja Coal, while the remaining 26% stake is held by Fairy Wing Trading 136, a South African company. Ledjadja Coal obtained US$450 million in financing from FirstRand Bank, Industrial Development Corporation of South Africa, and Noble Resources International.[10]

In June 2019, a "Market Update" on Resgen's website announced that all members of the proposed Lending Syndicate had confirmed credit approval for funding the development of the mine, pending terms, conditions and board approval, for a total funding package of R4.2b.[11] On April 2, 2020, Resgen announced that the final investment decision (FID) on the mine would be delayed from April 2020 until at least June 30 due to logistical and financial problems caused by the COVID-19 pandemic.[12]

Resgen's capacity to develop the mine was thrown into further doubt in Fall 2020 after the withdrawal of two of four key financial backers. By late October 2020, the company flagged it would need US$1 million to keep the company operating through to the end of January 2021. Noble Resources ruled out providing additional funding to get the project to financial close and South Africa’s Government Employees Pension Fund also withdrew its support for the proposal.[13]

In March 2020, Resgen announced that it was engaging with Noble Group for the purposes of securing access to additional working capital to finalize a strategic review of the company that was initiated in November 2020. Resgen considered measures to ensure the continued solvency of the group and alternatives for progressing development of the Boikarabelo project.[14]

After developing the Boikarabelo project for more than a decade, Resgen announced in April 2021 that funding has been halted, the CFO and COO have stepped down, and the company is mulling its options, including possibly going into administration.[15][16]

Project Details

  • Sponsor: Resgen South Africa[17]
  • Parent Company: Resource Generation (Australia)[17]
  • Location: Resgen, Limpopo, South Africa[17]
  • GPS Coordinates: -26, 27.545833 (approximate)
  • Status: Proposed
  • Production Capacity: 6 mtpa[17]
  • Total Resource: 99 million tonnes[17]
  • Mineable Reserves: 267.1 million tonnes[17]
  • Coal type: Thermal
  • Mine Size: 80 squared km[18]
  • Mine Type: Surface, open pit[17]
  • Start Year: TBD
  • Source of Financing:

Related GEM.wiki articles

  1. "New Power Station may push Boikarabelo Coal Mine Expansion," Bulk, July 6, 2011.
  2. "ResGen makes progress on two fronts in funding for Boikarabelo mine," BusinessDay, January 2, 2014
  3. "Resgen targets Oct 2015 for completion of Boikarabelo power supply infrastructure," Engineering News, October 29, 2014
  4. "Resgen expects delay at Boikarabelo mine," CNBC Africa, February 12, 2014
  5. "Resource Generation coal project Boikarabelo secures construction funding," Mining Review, September 30, 2015
  6. "Boikarabelo funding negotiations continue – Resgen," Mining Weekly, June 22, 2015
  7. "Resgen signs EPC deal for Boikarabelo plant," Mining Weekly, May 6, 2016
  8. Brendan Ryan, "Noble to take more coal from Resgen’s Boikarabelo mine," MiningMX, December 11, 2017
  9. "IEEFA South Africa: A New Coal Project Meant to Serve Export Markets Is Unlikely to Achieve Lasting Success," IEEFA, April 6, 2018
  10. "Coal production at Boikarabelo Coal Mine expected Q1 2019," African Mining Market, September 13, 2018
  11. "Market Update," June 24, 2019
  12. Marleny Arnoldi, Resgen expects financial close for Boikarabelo project later this quarter, Mining Weekly, April 2, 2020
  13. "Resgen says IDC resolves not to grant extension for Boikarabelo coal funding," Mining Weekly, October 28, 2020
  14. "Resgen secures additional funds for subsidiary’s austerity operating budget," Mining Weekly, March 15, 2021
  15. "Waterberg coalfield at a tough coalface," Business Live, May 20, 2021
  16. "Resgen cut off from further Noble funding, senior executives resign," Mining Weekly, April 16, 2021
  17. 17.0 17.1 17.2 17.3 17.4 17.5 17.6 Resegen, Boikarabelo Coal Mine, Company Website, accessed August 5, 2020
  18. Resources Annual Report, Resgen, accessed November 2020