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RSG - Resource Generation Limited - Quarterly Report for the three months ended

Release Date: 27/01/2012 10:13:02      Code(s): RSG
RSG - Resource Generation Limited - Quarterly Report for the three months ended 
31 December 2011                                                                
Resource Generation Limited                                                     
ACN 059 950 337                                                                 
(Incorporated and registered in Australia)                                      
(Registration number ACN 059 950 337)                                           
Share code on the JSE Limited: RSG ISIN: AU000000RES1                           
Share code on the Australian Stock Exchange Limited: RES ISIN: AU000000RES1     
(JSE short name: "Resgen" or "the Company")                                     
Quarterly Report for the three months ended 31 December 2011                    
Resource Generation is developing its Boikarabelo coal mine in the Waterberg    
region of South Africa, which has one of the country`s largest remaining coal   
deposits.  The Boikarabelo mine has probable reserves of 744.8 million tonnes of
coal on 35% of the tenements under the company`s control.                       
*    MOU signed with Transnet.                                                  
*    Boikarabelo mining right update.                                           
*    Regulatory approval update.                                                
*    Agreement signed to secure water for stage 2 of the mine operations        
*    Continued strong interest from financiers for debt funding.                
SOUTH AFRICA                                                                    
MOU signed with Transnet                                                        
Ledjadja signed a memorandum of understanding (MOU) with Transnet Freight Rail  
(TFR) during the quarter.  Under the MOU, TFR has agreed to haul Boikarabelo    
coal on a take or pay basis as follows: 4 million tonnes in the year commencing 
1 July 2014, 5 million tonnes in the year commencing 1 July 2015 and 6 million  
tonnes per annum from 1 July 2016.  50% of the coal will be hauled to export    
ports and 50% to the Mpumalanga Highveld, which is where Eskom`s power stations 
are located.  Freight rates are yet to be determined but will reflect           
commercially fair and reasonable terms.                                         
Whilst rail capacity currently exists, upgrade works on the existing line       
between Lephalale and Pyramid South have been identified and need to be         
completed before coal haulage can commence.  Ledjadja has agreed to undertake   
the upgrade works if TFR agrees.  These works are minor and able to be completed
prior to the forecast commencement of mining.  Ledjadja has also agreed to work 
with TFR to unlock additional capacity from the Waterberg.                      
The haulage agreement is conditional upon Boikarabelo commencing to produce     
coal, the upgrade works being completed and the rail link from Boikarabelo to   
the existing network being completed.  The rail link is part of the capital     
expenditure of the Boikarabelo mine and ownership and operations of the rail    
link will be transferred to TFR in due course with compensation to be           
negotiated.  The rail link is intended to be a common user facility.  The       
agreement is also conditional on TFR completing its Waterberg Feasibility Study 
aimed at unlocking a potential haulage capacity of 22.5 million tonnes per annum
from the Waterberg and formal allocation of capacity by TFR.                    
Ledjadja submitted a draft long term coal haulage agreement based on TFR`s      
standard terms and conditions on 18 November 2011.  Communications are occurring
and TFR`s recent announcements of infrastructure upgrades to expand the         
Waterberg network have been welcomed.                                           
Mining right update                                                             
As previously advised, the appeal that was lodged with the South African        
Department of Mineral Resources (DMR) against the 30 year mining right, does not
suspend the mining right, which remains valid. The statutory appeal process is  
underway and Ledjadja provided its formal response to the DMR in the previous   
quarter.  The DMR`s communication of its response to the appellants is awaited. 
The company is confident that the mining right will be confirmed and is         
continuing its normal activities to develop the mine.                           
Regulatory approval update                                                      
Ledjadja applied for approval under the National Environmental Management Act   
(NEMA) in January 2011 for construction of the mine infrastructure and the 36   
kilometre rail link route from the Boikarabelo mine to the existing Transnet    
rail line.  Public consultation and administrative reviews progressed without   
any material issues; however minor variations to the application resulted in    
departmental processes requiring a second environmental impact assessment, which
has delayed the expected NEMA approval until early 2012.                        
The application for an Integrated Water Use Licence (IWULA) in December 2010 has
also progressed to a mature stage.                                              
Agreement signed to secure water for stage 2 of the mine operations             
An agreement was signed during the quarter with the Lephalale Local Municipality
(LLM) in Limpopo Province which will secure the water required for stage 2 of   
the company`s planned Boikarabelo mine.                                         
Under the contract, which is subject to a number of conditions, the company will
construct, operate and maintain a wastewater treatment plant at Marapong,       
approximately 50 kilometres from Boikarabelo. This will treat municipal effluent
and generate up to 16 megalitres of water per day, which will be pumped to the  
mine site via a new pipeline.                                                   
Resource Generation has been working with LLM for two years on plans for the    
plant, which will provide LLM with essential infrastructure. This is a key      
responsibility which the company`s black empowered subsidiary, Ledjadja Coal    
(Pty) Limited, committed to undertake as part of its social and labour plan for 
the Boikarabelo mine.                                                           
The key terms of the agreement with LLM are as follows:                         
*    The term is 30 years from the date of grant of the water use licence by the
Department of Water Affairs, subject to satisfaction of a number of         
    conditions.  The conditions include an environmental impact assessment      
    being approved by relevant government departments by 28 February 2013,      
    sufficient power supply being secured by LMM, and all other required        
government approvals (including NEMA approval) being obtained by 28         
    February 2013. An extension of time is possible should delays be            
*    Resource Generation will pay for the Marapong wastewater treatment plant   
upgrade works and expansion works to extend capacity to 4 megalitres per    
    day by January 2014, increasing to 16 megalitres per day by January 2017.   
    It will also construct the Marapong -Boikarabelo effluent transfer pump     
    station and associated works including the transfer pipeline.               
*    Resource Generation will manage, operate and maintain the treatment plant  
    after the expansion at its own cost until the operations transfer date,     
    which is one year after completion of the expansion works. At that time LLM 
    will become responsible for management, operation and maintenance of the    
*    From 1 January 2014, the Boikarabelo mine will be supplied with a minimum  
    of 4 megalitres of treated effluent per day and from 1 January 2017 a       
    maximum of 16 megalitres per day.                                           
*    From the operations transfer date, Resource Generation will continue to pay
    for the operation and maintenance costs. The company will also pay for      
    insurance for the plant for the term of the agreement.                      
Continued strong interest from financiers for debt funding                      
Potential debt funders have confirmed their continued strong interest in        
providing project finance for the development of the Boikarabelo mine.          
Completion of the financiers` due diligence is subject to satisfactory          
arrangements with both TFR and Eskom.  The company is working toward contractual
arrangements with both of these parties.                                        
Drilling activities                                                             
Five large diameter core holes were drilled on the Kalkpan property which will  
be the commencement point for the Boikarabelo open cut mine pit.  A sixth hole  
is due to be completed in February.  These large cores are being used to obtain 
a greater understanding of the coal qualities and washability data of the       
Boikarabelo coal.  This information is necessary to fine tune the design of the 
coal preparation plant and to add to the information being provided to Eskom to 
supplement the earlier successful test burn results.                            
Two core holes were drilled on each of the three Waterberg One Coal properties  
as part of the requirements for maintenance of the prospecting rights.  Results 
were as expected and do not alter the earlier interpretations of resources and  
There was no activity during the quarter on Resource Generation`s uranium       
tenements in Cameroon.                                                          
CORPORATE INFORMATION                                                           
Brian Warner             Non-Executive Chairman                                 
Paul Jury                Managing Director                                      
Steve Matthews           Executive Director                                     
Geoffrey (Toby) Rose     Non-Executive Director                                 
Company Secretary                                                               
Steve Matthews                                                                  
Registered Office                                                               
Level 12, Chifley Tower                                                         
2 Chifley Square                                                                
Sydney NSW 2000                                                                 
Telephone:     02 9376 9000                                                     
Facsimile:     02 9376 9013                                                     
Website:       www.resgen.com.au                                                
Mailing Address                                                                 
GPO Box 5490                                                                    
Sydney NSW 2001                                                                 
Paul Jury                                                                       
Steve Matthews                                                                  
Anthony Tregoning, FCR on (02) 8264 1000                                        
JSE Sponsor: Deloitte & Touche Sponsor Services (Pty) Limited                   
*    Information in this report that relates to exploration results, mineral    
    resources or ore reserves is based on information compiled by Mr Dawie Van  
    Wyk who is a consultant to the Company and is a member of a Recognised      
    Overseas Professional Organisation. Mr Van Wyk has sufficient experience    
which is relevant to the style of mineralisation and type of deposit under  
    consideration and to the activity which he is undertaking to qualify as a   
    Competent Person as defined in the 2004 Edition of the `Australasian Code   
    for Reporting of Exploration Results, Mineral Resources and Ore Reserves`.  
Mr Van Wyk has given and has not withdrawn consents to the inclusion in the 
    report of the matters based on his information in the form and context in   
    which it appears.                                                           
Appendix 5B                                                                     
Mining exploration entity quarterly report                                      
Introduced 1/7/96.  Origin:  Appendix 8.  Amended 1/7/97, 1/7/98, 30/9/2001.    
Name of entity                                                                  
Resource Generation Limited                                                     
ABN                                      Quarter ended ("current quarter")      
91 059 950 337                           31 December 2011                       
Consolidated statement of cash flows                                            
                                            Current    Year to date             
Cash flows related to operating activities  quarter    (6 mths)                 
                                            $A`000     $A`000                   
1.1          Receipts from product sales    -          -                        
             and related debtors                                                

1.2          Payments for        (a)        (291)      (291)                    
             exploration and evaluation     (1,766)    (3,167)                  
                       (b)  development     -          -                        
(c)  production      (671)      (1,342)                  
                       (d)  administration                                      
1.3          Dividends received             -          -                        
1.4          Interest and other items of a  318        603                      
similar nature received                                            
1.5          Interest and other costs of    (2)        (4)                      
             finance paid                                                       
1.6          Income taxes paid              -          -                        
1.7          Other (provide details if      -          -                        
             Net Operating Cash Flows       (2,412)    (4,201)                  
Cash flows related to                                              
             investing activities                                               
1.8          Payment for purchases of:      -          -                        
             (a) prospects                  -          -                        
(b) equity investments    (79)       (79)                     
                  (c) other fixed assets                                        
1.12         Proceeds from sale of:   (a)   -          -                        
             prospects                      -          -                        
(b) equity investment     (38)       1,500                    
                                            -          -                        
                  (c) other fixed assets                                        
1.10         Loans to other entities        -          -                        
1.11         Loans repaid by other entities -          -                        
1.12         Other- Government charges in   57         454                      
             relation to land acquisitions                                      
                                            (60)       1,875                    
             Net investing cash flows                                           
1.13         Total operating and investing  (2,472)    (2,326)                  
cash flows (carried forward)                                       
                                            Current    Year to date             
                                            quarter    (6 mths)                 
                                            $A`000     $A`000                   
1.13         Total operating and investing  (2,472)    (2,326)                  
             cash flows (brought forward)                                       
             Cash flows related to                                              
1.14         financing activities           -          -                        
Proceeds from issues of                                            
             shares, options, etc.                                              
1.15         Proceeds from sale of          -          -                        
             forfeited shares                                                   
1.16         Proceeds from borrowings       -          -                        
1.17         Repayment of borrowings        -          -                        
1.18         Dividends paid                 -          -                        
1.19         Other (BEE Loan)               -          (1,283)                  

             Net financing cash flows       -          (1,283)                  
             Net increase (decrease) in     (2,472)    (3,609)                  
             cash held                                                          

1.20         Cash at beginning of           23,685     25,322                   
             quarter/year to date                                               
1.21         Exchange rate adjustments to   (388)      (888)                    
item 1.20                                                          
1.22         Cash at end of quarter         20,825     20,825                   
Payments to directors of the entity and associates of the directors             
Payments to related entities of the entity and associates of the related        
                                                Current quarter                 
1.23   Aggregate amount of payments to the       272                            
parties included in item 1.2                                              
1.24   Aggregate amount of loans to the parties  -                              
      included in item 1.10                                                     
1.25   Explanation necessary for an understanding of the                        
      Executive salaries and directors fees                                     
Non-cash financing and investing activities                                     
2.1  Details of financing and investing transactions which have had a           
    material effect on consolidated assets and liabilities but did              
    not involve cash flows                                                      
2.2  Details of outlays made by other entities to establish or increase         
    their share in projects in which the reporting entity has an interest       
Financing facilities available                                                  
Add notes as necessary for an understanding of the position.                    
                                       Amount available    Amount used          
                                       $A`000              $A`000               
3.1   Loan facilities                   -                   -                   
3.2   Credit standby arrangements       -                   -                   
Estimated cash outflows for next quarter                                        
4.1      Exploration and evaluation                   (210)                     
4.2      Development                                  (1,983)                   
4.3      Production                                   -                         
4.4      Administration                               (637)                     
        Total                                        (2,830)                    
Reconciliation of cash                                                          
Reconciliation of cash at the end of  Current quarter     Previous quarter      
the quarter (as shown in the          $A`000              $A`000                
consolidated statement of cash                                                  
flows) to the related items in the                                              
accounts is as follows.                                                         
5.  Cash on hand and at bank          32                  443                   
5.  Deposits at call                  20,453              22,788                
5.  Bank overdraft                    -                   -                     
5.  Other (Bank guarantees)           340                 454                   
   Total: cash at end of quarter     20,825              23,685                 
   (item 1.22)                                                                  
Changes in interests in mining tenements                                        
                      Tenement        Nature of       Interest   Interest at    
                      reference       interest        at         end of         
                                                      beginning  quarter        
of quarter                
6.1   Interests in     N/A             N/A             N/A        N/A           
     reduced or                                                                 
6.2   Interests in     N/A             N/A             N/A        N/A           
     acquired or                                                                
Issued and quoted securities at end of current quarter                          
Description includes rate of interest and any redemption or conversion rights   
together with prices and dates.                                                 
Total number  Number       Issue      Amount paid     
                                        quoted       price per  up per          
                                                     security   security        
                                                     ($)        ($)             
7.1    +Preference        N/A                                                   
7.2    Changes during     N/A                                                   
       Increases through                                                        
through returns                                                          
       of capital, buy-                                                         
7.3    +Ordinary          262,895,652   262,895,652  Various    Fully paid      
7.4    Changes during                                                           
quarter            Nil                                                   
       through issues                                                           
       through returns                                                          
       of capital, buy-                                                         
7.5    +Convertible debt  N/A                                                   
7.6    Changes during     N/A                                                   
       Increases through                                                        
       Decreases through                                                        
7.7     Options                                       Exercise   Expiry date    
(description and   450,000       Nil          price      28/11/2012      
       conversion         1,875,000     Nil                     31/12/2012      
       factor)            1,875,000     Nil          $0.25      7/7/2013        
                          250,000       Nil                     17/3/2013       
450,000       Nil          $0.50      28/11/2012      
                          250,000       Nil                     17/3/2013       
                          350,000       Nil          $0.50      17/3/2013       
                          350,000       Nil                     17/3/2013       
375,000       Nil          $0.50      28/5/2013       
                          375,000       Nil                     28/5/2013       
                          500,000       Nil          $0.60      28/5/2013       
7.8     Issued during      Nil                                                  
7.9     Exercised during   Nil                                                  
7.10    Expired during     Nil                                                  
7.11    Debentures         N/A                                                  
       (totals only)                                                            
7.12    Unsecured notes    N/A                                                  
       (totals only)                                                            
Compliance statement                                                            
1    This statement has been prepared under accounting policies which comply    
with accounting standards as defined in the Corporations Act or other       
    standards acceptable to ASX (see note 5).                                   
2    This statement does give a true and fair view of the matters disclosed.    
3    The information contained in this report has not been reviewed nor reported
on by the company`s auditors.                                               
Date: 27 January 2012                                                           
(Company secretary)                                                             
Print name:    STEPHEN JAMES MATTHEWS                                           
1    The quarterly report provides a basis for informing the market how the     
    entity`s activities have been financed for the past quarter and the effect  
    on its cash position.  An entity wanting to disclose additional information 
is encouraged to do so, in a note or notes attached to this report.         
2    The "Nature of interest" (items 6.1 and 6.2) includes options in respect of
    interests in mining tenements acquired, exercised or lapsed during the      
    reporting period.  If the entity is involved in a joint venture agreement   
and there are conditions precedent which will change its percentage         
    interest in a mining tenement, it should disclose the change of percentage  
    interest and conditions precedent in the list required for items 6.1 and    
3    Issued and quoted securities The issue price and amount paid up is not     
    required in items 7.1 and 7.3 for fully paid securities.                    
4    The definitions in, and provisions of, AASB 6: Exploration for and         
    Evaluation of Mineral Resources and AASB 107: Statement of Cash Flows apply 
to this report.                                                             
5    Accounting Standards ASX will accept, for example, the use of International
    Financial Reporting Standards for foreign entities.  If the standards used  
    do not address a topic, the Australian standard on that topic (if any) must 
be complied with.                                                           
Date: 27/01/2012 10:13:01 Supplied by www.sharenet.co.za                     
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