Resource Generation (ASX: RES) has signed an agreement to acquire two properties adjacent to the company's Boikarabelo Coal Mine, which would enable to company to progress Boikarabelo faster than previously planned.
The two properties, Swelpan and Kleinpan, cover about 2,096 hectares. Kleinpan provides an ideal location for a 2x660 megawatt power station which is proposed to be built by CESC Limited.
This power station would allow Resource Generation to begin the stage 2 expansion of Boikarabelo earlier than planned.
In addition, Swelpan contains coal resources contiguous to the Boikarabelo coal tenements.
Managing director Paul Jury said the transactions would enhance the value of the project.
"The acquisition of the land enhances our ability to expand to stage 2, while the additional coal tenements would deliver ideal mining synergy enabling a continuation of the mine's strike length in an easterly direction, enhancing efficient mining," Jury said.
Resource Generation's Black Economic Empowerment subsidiary, Ledjadja has granted a put option to the current owner of the tenements, Exxaro Resources, under which Exxaro can sell the prospecting rights over four properties to Ledjadja.
Any transfer will be subject to approval by the Department of Mineral Resources.
Exxaro's tenements host an Indicated Resource of 974.5 million tonnes of coal, excluding shale content. The quality of coal is consistent with the Boikarabelo tenements.
If the deal goes ahead, the JORC Resource at Boikarabelo will increase by 31%, to a total of 4.09 billion tonnes, alongside the JORC Probable Reserve of 744.8 million tonnes.
Boikarabelo offtake agreements
The Boikarabelo mine, one of South Africa's largest existing coal deposits, is located in South Africa's Waterberg region which is believed to contain about 40% of South Africa's remaining coal resources.
Importantly, Resource Generation 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.