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RSG - Resource Generation Limited - Boikarabelo update

Release Date: 20/09/2011 10:29:14      Code(s): RSG
RSG - Resource Generation Limited - Boikarabelo update                          
Resource Generation Limited                                                     
Registration number ACN 059 950 337                                             
(Incorporated and registered in Australia)                                      
Share code on the JSE Limited: RSG                                              
Share code on the Australian Stock Exchange: RES                                
ISIN Code: AU000000RES1                                                         
("the Company")                                                                 
20 September 2011                                                               
ASX Release                                                                     
Boikarabelo Update                                                              
Resource Generation has completed detailed mining fleet and engineering         
designs for its planned Boikarabelo mine in the Waterberg region of South       
Africa, where there are probable reserves of 744.8 million tonnes of coal       
on 35% of the tenements controlled by the company. These designs will           
enable the company to fast track construction once funding is secured.          
Detailed designs for the 40MW power station required for stage 1 are            
being finalised and its funding has been included in the mine`s capital         
Using the mid-range cost estimate of $100 million for construction of the       
power station, estimated capital expenditure for construction of stage 1        
of the mine is now $750 million. This is higher than originally estimated       
due to inclusion of the power station and increased construction costs,         
particularly for the coal handling and washing facilities. The company is       
considering the possibility of segregating debt funding for the power           
station from the project facility for the mine.                                 
Project funding is conditional on a rail haulage contract with Transnet         
Freight Rail (TFR). To date, TFR`s task team negotiating with Resource          
Generation has declined to commit to a contract and the company has             
elevated the matter to Transnet`s group chief executive who in the past         
has indicated his support for the Boikarabelo project and for a rail            
haulage contract.                                                               
Meanwhile, progress has been made in obtaining the two remaining major          
licence approvals.  The first, under the National Environment Management        
Act (NEMA), will enable construction of the mine and the rail link to           
begin and, as soon as this is received, pre-construction works will             
commence on site. The second is the Integrated Water Use Licence from the       
Department of Water Affairs, enabling the use of water from the borefield       
on the company`s properties, which will provide sufficient water for            
stage 1 of the mine`s operations. Both licence approvals are expected           
during the final quarter of 2011.                                               
As anticipated by the company in an announcement on 12 August, the South        
African Department of Mineral Resources (DMR) has notified the company`s        
subsidiary, Ledjadja Coal (Pty) Limited, that an appeal has been lodged         
regarding the granting of the Boikarabelo mining right.  The appeal does        
not suspend the mining right, which remains valid. The statutory appeal         
process is now underway and Ledjadja has provided its formal response to        
the DMR. The company is confident that the mining right will be confirmed       
and is continuing its normal activities to develop the mine.                    
Discussions continue with Eskom for supply of coal to the Mpumalanga            
power stations.                                                                 
Paul Jury, managing director of Resource Generation, said: `The                 
reluctance of TFR`s task team to commit to a rail haulage contract will         
delay the mine`s initial production until the first half of 2014,               
assuming an acceptable contract is agreed by the end of 2011 and funding        
is obtained. We are confident of achieving a contract with TFR eventually       
and believe the delay is related to process and timing, rather than             
inability to provide haulage.                                                   
`We are proceeding with development activities and, after completing the        
sale of our Tasmanian tenements last week, have over $25 million in cash        
available. These funds are sufficient to enable us to continue normal           
operations for the foreseeable future.`                                         
Paul Jury, Managing Director on (02) 9376 9000 or                               
Steve Matthews, Company Secretary on (02) 9376 9000                             
Media enquiries                                                                 
Anthony Tregoning (02) 8264 1000                                                
Sydney, Australia                                                               
JSE Sponsor: Deloitte & Touche Sponsor Services (Pty) Limited                   
Resource Generation is developing the Boikarabelo coal mine in the              
Waterberg region of South Africa where there are probable reserves of           
744.8 million tonnes of coal on 35% of the tenements under its control.         
Date: 20/09/2011 10:29:14 Supplied by www.sharenet.co.za                     
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