The purchases will take place over 38 years, up from 20 years in the original contract signed in September 2010, and represent 102Mt more coal.
The initial offtake of 37Mt has increased to 73Mt and will begin when the Boikarabelo mine begins production, scheduled for late 2013, with the 66Mt balance after the mine’s stage 2 expansion.
The price of each shipment will be based on the international market price at the time.
Stage 2 of the mine’s development envisages doubling production to around 40Mtpa of run of mine coal. Beneficiating this to maximise production of export quality coal will also generate an equivalent volume of domestic product.
CESC, the flagship power company of the RPG Group which owns Integrated Coal Mining, is beginning a feasibility study for construction of a 2x660 megawatt 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 and would underpin plans to develop stage 2 and maximise export coal production.
Boikarabelo also intends to install its own small scale fluidised bed coal powered station at the minesite to supply power for mining operations. CESC has indicated it is prepared to assist with this project.
A wholly owned subsidiary of CESC, Bantal Singapore Pte, has agreed to subscribe $10 million for 12.2 million shares in Resource Generation at $0.82 per share, representing about 4.8% of the company’s issued capital.
Following this issue, RPG Group will have an interest of 11.6% in Resource Generation.
Resource Generation managing director Paul Jury said: “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.”
