Resource Generation signs agreement with Transnet Freight Rail for Boikarabelo coal

Resource Generation (ASX: RES) in a milestone for the company, has now signed a memorandum of understanding with Transnet Freight Rail.

Under the agreement it allows Resource Generation’s BEE subsidiary, Ledjadja, to haul Boikarabelo coal on a take or pay basis as follows.

- 4 million tonnes in the year commencing 1 July 2014;
- 5 million tonnes in the year commencing 1 July 2015; and
- 6 million tonnes per annum from 1 July 2016.

Half of the coal will be hauled to export ports with the remaining half to the Mpumalanga Highveld, which is where Eskom’s power stations are located.

Freight rates are yet to be determined but will reflect commercially fair and reasonable terms.

Paul Jury, managing director, commented on the positive news for the company.

"It is pleasing that we have been able to complete this first step in working with Transnet to open up the Waterberg coalfields.

"Whilst it is a binding agreement, its conditionality prevents it from triggering a move to project funding.

"We will be making every effort in the next few months to finalise the contract which will be necessary to complete the funding required to develop the Boikarabelo mine."


Rail capacity currently exists

Resource Generation said that while rail capacity currently exists, upgrade works on the existing line between Lephalale and Pyramid South have been identified and need to be completed before coal haulage can commence.

Ledjadja has agreed to undertake the upgrade works if Transnet Freight Rail agrees.

These works are minor and able to be completed prior to the forecast commencement of mining. Ledjadja has also agreed to work with TFR to unlock additional capacity from the Waterberg.

The haulage agreement is conditional upon Boikarabelo commencing to produce coal, the upgrade works being completed and the rail link from Boikarabelo to the existing network being completed.

The agreement is also conditional on Transnet Freight Rail completing its Waterberg Feasibility Study aimed at unlocking a potential haulage capacity of 22.5 million tonnes per annum from the Waterberg and formal allocation of capacity by Transnet Freight Rail.


About Boikarabelo

The Boikarabelo coal mine is located in the Waterberg region of South Africa, which hostst 744.8 million tonnes of coal on 35% of the tenements under the company's control.

Originally published at: http://www.proactiveinvestors.com.au/companies/news/21219/resource-generation-signs-agreement-with-transnet-freight-rail-for-boikarabelo-coal-21219.html