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Resource Generation Commences Construction At Boikarabelo Coal Project

Resource Generation (ASX: RES) has begun mine construction activities at its Boikarabelo coal project in South Africa, with the development now classified as an operating mine site.

Positive progress is also being made on the debt financing front, with due diligence now completed by the independent technical, market, legal and other consultants engaged on behalf of the financiers.

Resource Generation's Black Economic Empowerment subsidiary, Ledjadja Coal, previously mandated six South African and global banks and other financiers to provide project debt finance for the construction of Boikarabelo.

Subject to obtaining final credit approval and execution of finance and security documents, the Financing Syndicate will provide about 60% of the total funds required for mine construction.

Importantly, due diligence has confirmed that there are no material issues affecting the development or financing of the mine.

Resource Generation continues to assist the financiers with their enquiries during the approval processes.

The company does not expect any significant delay in the completion of the credit approval process.

If funding is completed by the end of March 2013, construction of the mine, its infrastructure and the rail link is expected to take 24 months, with Stage 1 saleable production of 6 million tonnes per annum beginning at the end of the first quarter in 2015.

Construction plan

Initial activities will include site infrastructure, roadworks and water and power connections.

Further geotechnical boreholes are also being drilled across the initial mining area.

Boikarabelo development

The Boikarabelo mine has a major 6.4 billion tonne resource - with current probable reserves of 745 million tonnes and three long term export contracts already in place.

The most recent coal offtake contract was secured with Noble Group (SGX:N21), Asia's largest diversified commodities trading company, for the supply of 2.5 million tonnes of coal over a five year period.

Boikarabelo's reserve represents only 35% of the current resource area, meaning there are many more years of production possible.

Stage one of the mine development targets saleable coal production of 6 million tonnes per annum in early 2015, with stage two planned to increase to more than 20 million tonnes per annum.

Boikarabelo is host to a large shallow resource and reserve base, and has a substantial production profile with long term offtake secured.

Resource Generation remains well funded with A$6.5 million in cash reserves at the end of December 2012, and a funding deal with Noble Group for a further $20 million to augment available funding and progress construction activities.

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