Monday, 20 February 2012

Resource Generation trades higher in recent weeks as stage two at Boikarabelo progresses

Resource Generation’s (ASX: RES) share price has gained 16% over the past three weeks as the company progresses the development of the Boikarabelo Coal Mine in South Africa.

Shares in Resource Generation have risen from a low of $0.365 on January 25 to today’s closing price of $0.42.

The company is moving ahead with stage two of development at Boikarabelo, after securing water for the project in December 2011.

Resource Generation signed an agreement with the Lephalale Local Municipality in Limpopo Province which, subject to a number of conditions, will see Lephalale construct, operate and maintain a wastewater treatment plant at Marapong, about 50 kilometres from Boikarabelo.

The plant will provide sufficient water for the medium and long-term needs of the mine and provide the local municipality with essential infrastructure and environmental protection.

Boikarabelo offtake agreements

The Boikarabelo mine is located in South Africa’s Waterberg region, which is believed to contain about 40% of South Africa’s remaining coal resources.

Resource Generation has established a Probable Reserves of 744.8 million tonnes of coal covering just 35% of its tenements at the project.

Importantly, the company already has two major 20 year off-take agreements in place at Boikarabelo, with Indian steel company Bhushan Steel and Integrated Coal Mining.

Bhushan Steel has agreed to purchase coal from Boikarabelo at a rate of 500,000 tonnes of thermal coal per annum, with the price to be determined by international market prices at the time of each shipment.

Meanwhile, the agreement with Integrated Coal comprises one million tonnes of thermal coal annually for three years followed by two million tonnes each year for a further 17 years.

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