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Rsg - Resource Generation Limited - Transcript Of Webcast By Paul Jury Managing

Release Date: 09/05/2012 08:58:01      Code(s): RSG
RSG - Resource Generation Limited - Transcript of webcast by Paul Jury Managing 
Director Resource Generation                                                    
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                                                         
("Resgen" or "the Company")                                                     
BRR MEDIA                                                                       
TRANSCRIPT OF WEBCAST BY PAUL JURY MANAGING DIRECTOR                            
RESOURCE GENERATION                                                             
WEDNESDAY, 9 MAY 2012                                                           
Q1   Today on BRR I`m joined by Mr Paul Jury, the Managing Director of Resource 
    Generation.  The Company has released some significant updates for its      
Boikarabelo Project and Paul is going to talk me through a few points now.  
    Paul, a couple of questions.  Can I get you to start by talking through the 
    significance of the water licence approval and the dismissal of the mining  
    right appeal for the Project?  With these milestones now completed, does    
this open the development path for the Project?  Could I ask you to provide 
    an update on the Transnet contract discussions and, finally, what           
    activities are you now focused on to progress the Project?                  
A1   Thanks very much.  We`ve just released to the market a presentation update 
on the Boikarabelo Project and where we stand with its development path     
    and, I guess, to deal with the questions and probably to cover, the first   
    part of that presentation would hopefully answer most of those questions as 
    well.  So in terms of the presentation itself, I`ll talk to slides 3 to 7   
of the presentation, just to give a better feel for where we`re at.         
    The significance of receiving the water use licence and the dismissal of    
    the appeal against the mining right was that it effectively cleared the     
    path for all our regulatory approvals for the Project to proceed.  And      
that`s a very pleasing step, and it`s certainly a significant step,         
    especially given the size and the nature of the quality of this Project and 
    its development for both the Limpopo Region and for South Africa itself.    
    However, dealing with slide number 3 of our presentation - the major bridge 
that we always had to cross was securing a contract with Transnet.  That`s  
    certainly a significant bridge that we`re still walking across, but we are  
    at a very mature stage in that process after some two years of              
    negotiations, and we hope that that can come to a successful conclusion     
very soon.                                                                  
    On that basis, I guess, the mine construction timeline would follow a path  
    of us having first to go to our project finance  banks, get them to         
    complete a detailed due diligence and, having secured the project funding,  
to cap up our requirements with equity, then get into the mine construction 
    phase.  So that funding stage we would see as a four to five month process, 
    and then the mine construction phase would be another 24 months.  So the    
    timeline to the first production from the mine would probably follow that   
path.  So, really, the starting gun for that is to complete the contract    
    with Transnet.                                                              
    On that basis I`ll move to slide number 4.  In relation to our negotiations 
    with Transnet, one of the major obstacles we`ve had in our discussions with 
them has been their insistence that they first complete feasibility studies 
    associated with allocations from the Waterberg.  They would not make a firm 
    commitment until those studies were completed.  For some time, I guess, we  
    have been bashing our heads up against each other in respect to a firm      
allocation.  What we have done is reached a compromise with them.  We,      
    ourselves, do not have a concern with the capacity available in the system, 
    particularly in respect to our 6 million tonnes.  I should add that we are  
    very firm, we are very committed to signing a take or pay contract for      
that.  In doing so, I guess, we have asked Transnet to put a deadline with  
    respect to their own feasibilities or their own studies, and we`ve agreed   
    that, in the case that they haven`t completed their studies by the end of   
    December this year, that our commitment would become firm.                  
On that basis we believe that we`d be able to take the contract to our      
    banks.  Firstly, however, we have to complete tariff negotiations and we    
    just expect that that tariff should be fair and equitable, basically        
    associated with charges that they made to other Waterberg operators.        
Hopefully in the very near future we should see some conclusions to these   
    negotiations, in which case we could then move on.                          
    That being the case we could move to slide number 5 where we would be       
    talking basically to our banks straight away after signing the contract,    
getting them into detailed due diligence.  Total project capex is still     
    about $US750 million and our plan there is to first secure our project      
    financing, which would probably cover around about 50 per cent of that      
    capital requirement based on the indicative offers that we have received    
from the project banks.  Once we`ve got that project financing agreement at 
    least in some form of secure form, then we`d be able to move to the equity  
    markets to top up our capital expenditure requirement through an equity     
    raising.  That`s the process that would probably take four to five months   
after we`ve signed the Transnet contract.                                   
    Just to move on about what we believe is the strengths of the Project, On   
    to slide 6 - what are the attributes that would support a successful        
    fundraising, particularly from debt and equity?  Clearly, we have a very    
large coal deposit, very shallow overburden.  It`s a very low-cost mining   
    operation.  Already there`s a 745 million tonne bankable reserve defined    
    within that.  It only represents 35 per cent of the total resource, so it`s 
    a significant deposit and, with a long-life mine, a very low-cost           
operation.                                                                  
    In conjunction with that, we`ve secured some long-term export thermal coal  
    contracts.  There is still strong long-term export thermal coal demand,     
    particularly out of India, and we have two long-term contracts with Indian  
companies there, one for 38 years and another one for 20 years.  If we were 
    to proceed with project funding we would be able to secure further          
    contracts, but we don`t want to over-commit ourselves at this early stage   
    of the Project.                                                             
Now, they`re really the two strong attributes that are supporting, the      
    financiers` interest in the Project.  To some extent there is also a        
    middlings production stream.  There is solid domestic demand from Eskom     
    particularly, and that would also provide upside to our cash flows.  But    
the critical elements are the strong export thermal coal demand and,        
    obviously, the low-cost mining opportunity that presents itself with our    
    deposit.                                                                    
    I`d like to add, by moving to slide 7, that one of the major issues         
associated with our company and our Project has been this perception of     
    sovereign risk, investing in South Africa.  I`d have to say that I don`t    
    particularly see that myself.  Our experience over the last few years has   
    been driven by the fact that we focused on becoming a very effective BEE in 
ourselves, within the Company, and our BEE partners are very much a         
    singular part of our whole management structure.  So we operate as one and, 
    I guess, the effectiveness of that has been that we`ve been able to move    
    through and facilitate all the necessary approvals through the various      
departments and bureaucracies that are required, obviously, the three big   
    ticket items being the mining right, receiving our development consent,     
    which is a life of mine development consent which enables not only the      
    construction of the mine but also the rail link, and, most recently, the    
issuing of the water use licence.  There will be other processes that we    
    have to go through, but I have to say it certainly signifies an effective   
    BEE when the formula is approached in the right sort of form.               
    So that wraps up the part of the presentation I`d like to talk about.  In   
closing though, in terms of confidence, Transnet have expressed a strong    
    desire to open up the Waterberg.  It is definitely one of the future areas  
    for development within South Africa, and there`s been a big commitment by   
    them as well as the government.  Signing a take or pay contract with us is  
clearly low-hanging fruit for them and it should be something that they     
    ought to grasp because it would not only underwrite our Project but also    
    underwrite one of the first developments of this major area for the         
    country.                                                                    
I would encourage people to walk through the remainder of the presentation  
    off our website.  We do provide in there some updated material on the       
    status of the mine and a lot of the detail that we`ve been going through in 
    order to make sure that it is truly a deliverable Project.  Thank you very  
much.                                                                       
RECORDING CONCLUDED                                                             
Sydney, Australia                                                               
9 May 2012                                                                      
Contacts                                                                        
Paul Jury, Managing Director on (02) 9376 9000 or                               
Steve Matthews, Company Secretary on (02) 9376 9000                             
Media enquiries                                                                 
Anthony Tregoning (02) 8264 1000                                                
JSE Sponsor: Deloitte & Touche Sponsor Services (Pty) Limited                   
Date: 09/05/2012 08:58:01 Supplied by www.sharenet.co.za                     
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