Coal development company Resource Generation (ResGen) has signed a letter of intent (LoI) with Sedgman for design, procurement and construction of a coal handling and preparation plant (CHPP) for the Boikarabelo mine in Waterberg, South Africa.

ResGen said that the $141m contract price represents a saving from the previously announced estimate.

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The letter also allows for negotiation of a CHPP operations contract with Sedgman for a period of three years following the expiry of a 15-month operations contract.

"This is a step closer to securing full funding for its completion."

This would cover the warranty period post-commissioning and also negotiate a contract with Sedgman for construction of the ancillary infrastructure works at the mine.

ResGen CEO Rob Lowe said: "The conclusion of the EPC contract with a leading contractor based on the significantly reduced capital cost of the project is a major milestone for the Boikarabelo Mine and ResGen, and is a step closer to securing full funding for its completion.

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"Sedgman has successfully delivered coal projects across southern Africa, and it is our intention to negotiate a three-year CHPP operations contract and a contract of for the construction of ancillary infrastructure with Sedgman post commissioning of the Boikarabelo Plant."

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The Boikarabelo coal seam lies between 20m and 30m below the surface, with a thickness ranging between 120m and 130m.

Boikarabelo tenements are located 40km by road from an existing rail system that provides access to domestic markets and to the ports of Maputo, Richards Bay and Durban for export shipments.