The Resource Generation coal project Boikarabelo, which represents one of South Africa’s largest remaining coal deposits in the Waterberg coal fields, can now proceed with construction owing to a resolution regarding a lack of funding.
The company received a signed Memorandum of Understanding from HAB & JPR Privée, a Swiss private company, to provide in principle funding of EUR480 million to enable construction of Resource Generation’s mine, which targets 6 Mtpa of saleable coal production from stage 1 of its development.
HAB & JPR Privée has indicated that if there is a change of directors it reserves the right to cancel the loan facility. This follows the decision by Altius Investment Holdings, an associate of Noble Group, to requisition a general meeting to replace Resource Generation’s board with its own nominees.
Altius has been working with Noble Group to structure debt funding as part of a club of South African financiers that would result in a substantial transfer of value from the company’s shareholders and its BEE partner to the financiers.
To ensure the deal with HAB & JPR Privée proceeds, Resource Generation MD Paul Jury says: “We look forward to shareholders rejecting Altius’ attempt to change the board for the benefit of the debt club members.”
“We are pleased, after a protracted process of seeking funding in a difficult market for coal projects, to have achieved, in principle, agreement for funding to enable all the remaining phases of the mine construction and its social labour programmes to be completed,” Jury continues.
“The cost of HAB & JPR Privée’s funding is the most attractive of the various sources that we have considered and materially more favourable than the incomplete proposals of the debt club involving Noble Group and Altius.”
HAB & JPR Privée’s decision to fund construction of the Boikarabelo mine has been driven by its desire to work with Resource Generation which it sees as a company that is socially responsible, attentive to the environmental impact of its projects and sensitive to the local community, as well as observing the highest health and safety standards to protect its workers and the general population.
The funding will be provided in two tranches: EUR175 million on or before 31 January 2016, and EUR305 million in June 2016. The two tranches will be deposited into an account controlled by Resource Generation and drawn down in nine quarterly installments as required for the mine’s construction. The key terms are: