By Robb M. Stewart
MELBOURNE--Resource Generation Ltd. (RES.AU), a small Australian
mining company sitting on a big coal deposit in South Africa's
promising Waterberg region, said Tuesday it has lined up an
international group of financiers to provide roughly 400 million
Australian dollars (US$409 million) in debt to fund the project's
development.
It is another milestone for the company and a vote of confidence
by the lenders in India's appetite for coal to feed the country's
energy needs, since Resource Generation has in place two
long-running supply deals with Indian companies. It also comes
despite the labor disputes spreading across South Africa.
Resource Generation said it selected Barclays PLC
(BCS)-controlled Absa Group Ltd. (ASA.JO), HSBC Holdings PLC (HBC),
FirstRand Ltd.'s (FSR.JO) Rand Merchant Bank, Nedbank Group Ltd.
(NED.JO), Standard Chartered PLC (STAN.LN) and Caterpillar
Financial to provide 60% of the funds needed for constructing its
Boikarabelo mine.
Formal credit approval is expected in early November, after
which the company said it would push ahead with an equity raising
it hopes to complete by mid-December. On that timetable,
construction of the mine could proceed in January, it said.
The senior debt facility has a term of nine years and will
provide a mix of U.S. dollar and rand loans on commercial terms.
Paul Jury, managing director of the Australian and
Johannesburg-listed firm, said the terms of the equity raising have
yet to be determined.
Resource Generation is backed by a unit of RPG Group, which has
agreed a 38-year contract for coal supplies, and Bhushan Steel Ltd.
(500055.BY), which has a 20-year contract.
The Waterberg is forecast to become the main source of coal in
South Africa as existing operations age. It is estimated to hold
some 40% of the country's remaining coal resources, much of it
sitting relatively close to the surface.
Resource Generation estimates the Boikarabelo project has
probable reserves of almost 745 million metric tons of coal. It is
targeting output in the first stage of development of 6 million
tons a year.
In late August, the company trimmed the expected capital cost of
Boikarabelo by US$120 million to US$630 million to reflect a
commitment by state-owned power company Eskom to provide
electricity to the mine. It earlier in the year secured a haulage
agreement that will cover production in the first phase of
development, a hurdle that had to be cleared in order to secure
funding as the rail tariff is likely to represent a big chunk of
the cost of production.
The latest arrangement with the financiers helped spark a rally
in the company's shares, lifting them almost 20% before those gains
were pared somewhat.
Write to Robb M. Stewart at robb.stewart@wsj.com
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