As part of its effort to diversify its business, Blumont Group, a Singapore-based company has signed a share subscription agreement to acquire 15 percent interest in South African coal miner Resource Generation (RES).

Blumont Group will acquire 15 percent stake in RES at an issue price of $0.22 per share.

Although the transaction is still subject to shareholder approval, Blumont is likely to invest between $20 million and $25 million for the stake, depending on the final structure of the placement of shortfall shares from the entitlement offer which it will susbscribe for.

According to reports, the investment will be funded from internal resources.

In a statement concerning the proposed deal, Paul Jury, Managing Director of Resource Generation said, the company will detail a positive recommendation to shareholders in the notice of annual general meeting in due course.

According to him,  “together with the leveraged funding alternatives we [Blumont] are vigorously pursuing, the extended equity placement to Blumont minimises any further equity requirements for the development of the Boikarabelo mine.”

Proceeds from the deal will be used to develop Resource Generation’s Boikarabelo coal mine in Waterberg, South Africa.

The Waterberg coal field comprises approximately 40 percent of South Africa’s remaining coal resource with probable reserves of 744.8 million tonnes of coal on 35 percent of the tenements under the company’s control.

“We are strengthening our earlier entrance into the thermal coal space. We foresee that the Waterberg Boikarabelo coal mine will be the centrepiece in our global thermal strategy,” Neo Kim Hock, Blumont’s executive chairman, said.