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RESOURCE GENERATION LIMITED - Quarterly Report for the three months ended 30 September 2012

Release Date: 17/10/2012 08:31:00      Code(s): RSG     
Resource Generation Limited
Registered in Australia under the Corporations Act, 2001 (Cth) with registration number ACN: 059 950 337
ISIN: AU000000RES1
Share Code on the ASX: RES
Share Code on the JSE: RSG
("Resgen" or the ?Company?) 

                               Quarterly Report
                for the three months ended 30 September 2012

 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. Stage 1 of the mine development
 targets saleable coal production of 6 million tonnes per annum.

  -  A financing syndicate has been mandated to provide approximately USD400 million by
     way of a project finance facility for the development of the Boikarabelo mine. The
     syndicate is now progressing towards formal credit approvals for the facility.
   - Assuming project finance is achieved, the company will progress to an equity raising for
     the balance of the funds needed to develop the mine.
   - Key achievements over the past four years have been:
     - Obtaining a 30 year mining right.
     - Obtaining life-of-mine development consent for construction of the mine and the rail
       link to the existing network.
     - Obtaining an integrated water use licence, that includes utilising borewater from the
       company?s properties, which will be sufficient for stage 1 of operations.
     - Sufficient power supply arranged for stage 1 of operations.
     - Acquisition of all land required for the mine and for the rail link, including some
       servitude arrangements.
     - Signing a long-term haulage contract with Transnet.
     - Two significant export contracts to supply thermal coal to Indian customers.
     - A fully compliant BEE structure.

   - All major regulatory hurdles have been overcome.

   - If funding is completed by the end of 2012, construction of the mine, its infrastructure
     and the rail link is expected to take 24 months, with Stage 1 saleable production (6
     million tonnes per annum) beginning at the start of 2015.

   - Construction of Stage 2, planned to increase saleable production to more than 20 million
     tonnes per annum, can be funded from cash flow.

Resource Generation Limited
Quarterly Report to 30 September 2012


Financing Syndicate Mandated
Since the end of the quarter, the company?s BEE subsidiary, Ledjadja Coal, has awarded a
mandate to six South African and global banks and other financiers to provide project debt
finance for the construction of the Boikarabelo mine. The financiers are:

        - Absa Capital, a division of Absa Limited, a member of the Barclays Bank Group;
        - Caterpillar Financial SARL;
        - FirstRand Bank Limited, acting through its Rand Merchant Bank division;
        - Hong Kong & Shanghai Banking Corporation (HSBC);
        - Nedbank Capital, a division of Nedbank Limited; and
        - Standard Chartered Bank.

This mandate followed an extensive tender process and negotiation of key commercial terms.
Subject to obtaining final credit approval and completing finance and security documents, the
financiers will provide approximately 60% of the total funds required for mine construction.

Due diligence reports have been prepared by independent experts engaged on behalf of the
financiers. The experts are Bowman Gilfillan, Coffey Mining, Jardine Lloyd Thompson,
KPMG and Wood McKenzie and their reports are under review by the financiers.

The financiers are now progressing towards formal credit approvals for the facility and these
are targeted for receipt in early November. Financial close and first funding are expected to
be subject to conditions precedent typical of project finance facilities, including raising
sufficient equity capital to fully fund the balance of the expected capital expenditure for mine

The proposed terms of the facility include:
        - A term of 9 years, including the construction period.
        - A senior debt facility of around USD400 million plus associated facilities (including a
          working capital facility).
        - The senior debt facility will be provided via a mix of USD and ZAR loans and is on
          normal commercial terms.

Based on the current timetable, once formal credit approval is obtained Resource Generation
will proceed with an equity capital raising. It is hoped that this can be completed by mid-
December 2012, which would enable development of the Boikarabelo mine to proceed in
January 2013.

Assuming credit approval for the debt funding, supported by the results of the due diligence,
the company is confident that the mine?s projected cash flow potential and value will be
recognised in the price of the proposed equity raising. However, the terms of the equity
raising and participants in the raising are still to be determined.

                                          Page 2 of 9
Resource Generation Limited
Quarterly Report to 30 September 2012

Reduction in capital expenditure
The company was able to reduce the estimated capital cost of the Boikarabelo coal mine
during the quarter by USD120 million to USD630 million (real). This reflects flexibility
provided by Eskom?s commitment to supply sufficient power for stage 1 of the mine?s
operation as early as 2014, after the first generating unit at its new Medupi power station is in
commercial operation. This will meet the company?s target of beginning coal production
early in 2015.

The cost of Boikarabelo?s planned 45MW power station, for which tenders have been
received, has been removed from the capital expenditure estimate for stage 1 of
Boikarabelo?s operations. A decision on whether to proceed with this will now not take place
until 2013.

Potential resource increase
During the quarter, Exxaro Resources exercised its put option under which it could require
Ledjadja Coal to acquire further coal tenements from Exxaro. The exercise of the put option
is subject to approval by the Department of Mineral Resources (DMR) under Section 11 of
the Mineral and Petroleum Resources Development Act, 2002.

The coal tenements are contiguous to the company?s existing tenements, including Swelpan
and Kleinpan which land is owned by Resource Generation. The consideration payable is not
material. The tenements can be added to Boikarabelo?s existing mining rights to secure their
tenure, subject to DMR approval. No amounts are due to be paid until the DMR has
approved the transfer to Ledjadja, Resource Generation?s BEE subsidiary. From prior
experience with Section 11 approvals, this process is not likely to be completed before mid-

Should the DMR approve the transfer, the Boikarabelo mine will increase its total resources
by 31%*. The following table reflects resources and reserves, excluding 50% for shale
content, after the transfer.

 Measured     Indicated     Inferred      Total    Probable
 Resource     Resource     Resource     Resource   Reserve
    (Mt)         (Mt)          (Mt)        (Mt)       (Mt)
  1,090.5      1,526.2       1,479.6     4,096.3     744.8

Eskom update
Negotiations with Eskom on the contractual terms for the initial supply of 3 million tonnes of
thermal coal per annum are now at a mature stage.

Coal handling and preparation plant update
A detailed review and analysis of the two front-end engineering designs, completed by major
providers of coal handling and preparation plants, were completed during the quarter. The
optimal solution has been determined from both a functional and cost perspective and is
being incorporated into the mine?s design.

There was no activity during the quarter on Resource Generation?s uranium tenements in

                                              Page 3 of 9
Resource Generation Limited
Quarterly Report to 30 September 2012

Cash reserves at 30 September 2012 were $8.9 million.

The main focus for the next quarter will be finalising the project finance for the development
of the Boikarabelo mine and the subsequent equity raising to meet the required total
expenditure required to develop the mine.


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

* 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

                                                  Page 4 of 9
  Resource Generation Limited
  Quarterly Report to 30 September 2012

                                                          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                                                                            30 September 2012

  Consolidated statement of cash flows
                                                                                  Current quarter      Year to date (3 mths)
Cash flows related to operating activities                                           $A?000                   $A?000

1.1       Receipts from product sales and related debtors                                         -                            -

1.2       Payments for       (a) exploration and evaluation                                   (23)                        (23)
                             (b) development                                               (2,318)                     (2,318)
                             (c) production                                                       -                           -
                             (d) administration                                              (201)                       (201)
1.3       Dividends received                                                                      -                           -
1.4       Interest and other items of a similar nature received                                168                         168
1.5       Interest and other costs of finance paid                                              (3)                         (3)
1.6       Income taxes paid                                                                       -                           -
1.7       Other (provide details if material)                                                     -                           -
          Net Operating Cash Flows                                                         (2,377)                     (2,377)

          Cash flows related to investing activities
1.8       Payment for purchases of: (a) prospects                                                -                           -
                                     (b) equity investments                                      -                           -
                                     (c) other fixed assets                                  (281)                       (281)
1.12      Proceeds from sale of:     (a) prospects                                               -                           -
                                     (b) equity investment                                       -                           -
                                         (subsidiary)                                            -                           -
                                     (c) other fixed assets                                      -                           -

1.10      Loans to other entities                                                               -                           -
1.11      Loans repaid by other entities                                                        -                           -
1.12      Other- Government charges in relation to land                                       601                         601
          acquisitions    and     development expenditure
                                                                                              320                         320
          Net investing cash flows
1.13      Total operating and investing cash flows (carried
                                                                                           (2,057)                     (2,057)

                                                                    Page 5 of 9
Resource Generation Limited
Quarterly Report to 30 September 2012

                                                                    Current quarter    Year to date (12 mths)
                                                                       $A?000                 $A?000
 1.13      Total operating and investing cash flows (brought
                                                                            (2,057)                   (2,057)
           Cash flows related to financing activities
 1.14      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)                                                 (1,161)                   (1,161)

           Net financing cash flows                                         (1,161)                   (1,161)

           Net increase (decrease) in cash held                             (3,218)                   (3,218)

 1.20      Cash at beginning of quarter/year to date                         12,116                    12,116
 1.21      Exchange rate adjustments to item 1.20                              (43)                      (43)
 1.22      Cash at end of quarter                                             8,855                     8,855

Payments to directors of the entity and associates of the directors
Payments to related entities of the entity and associates of the related entities
                                                                                            Current quarter
 1.23       Aggregate amount of payments to the parties included in item 1.2                              271

 1.24       Aggregate amount of loans to the parties included in item 1.10                                    -

 1.25       Explanation necessary for an understanding of the transactions
            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                                                  -                     -

                                                      Page 6 of 9
    Resource Generation Limited
    Quarterly Report to 30 September 2012

    Estimated cash outflows for next quarter
   4.1    Exploration and evaluation                                                                   (39)

   4.2    Development                                                                               (3,860)
   4.3    Production                                                                                       -
   4.4    Administration                                                                              (845)

          Total                                                                                     (4,744)

Reconciliation of cash
    Reconciliation of cash at the end of the quarter (as       Current quarter          Previous quarter
    shown in the consolidated statement of cash flows) to         $A?000                    $A?000
    the related items in the accounts is as follows.
    5.1   Cash on hand and at bank                                               148                    148

    5.2   Deposits at call                                                   8,707                    8,707

    5.3   Bank overdraft                                                           -                       -

    5.4   Other (Bank guarantees)                                                  -                       -

          Total: cash at end of quarter (item 1.22)                          8,855                    8,855

Changes in interests in mining tenements

                              Tenement reference        Nature of interest         Interest at   Interest at
                                                                                  beginning of     end of
                                                                                    quarter       quarter
   6.1    Interests in                       N/A                         N/A               N/A          N/A
          mining tenements
          reduced or lapsed

    6.2   Interests in                       N/A                         N/A              N/A          N/A
          mining tenements
          acquired or

                                                   Page 7 of 9
Resource Generation Limited
Quarterly Report to 30 September 2012

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 price per     Amount paid
                                                              quoted                     security    up per security
                                                                                              ($)                ($)
 7.1       +Preference                                N/A
            securities (description)
 7.2       Changes during quarter                     N/A
           (a) Increases through
           (b) Decreases
               through returns of
               capital, buy-backs,
 7.3       +Ordinary securities              262,895,652         262,895,652             Various           Fully paid

 7.4       Changes during quarter
           (a) Increases                               Nil
               through issues

           (b) Decreases                               Nil
               through returns of
               capital, buy-backs
 7.5       +Convertible   debt                        N/A
           securities (description)
 7.6       Changes during quarter                     N/A
           (a) Increases through
           (b) Decreases through
                securities matured,
  7.7      Options (description                                                   Exercise price         Expiry date
           and conversion factor)                 450,000                  Nil           $0.25           28/11/2012
                                                1,875,000                  Nil           $0.50           31/12/2012
                                                1,875,000                  Nil           $0.50             7/7/2013
                                                  250,000                  Nil           $0.50            17/3/2013
                                                  450,000                  Nil           $0.60           28/11/2012
                                                  250,000                  Nil           $0.70            17/3/2013
                                                  350,000                  Nil           $1.00            17/3/2013
                                                  350,000                  Nil           $1.50            17/3/2013
                                                  375,000                  Nil           $1.55            28/5/2013
                                                  375,000                  Nil           $1.85            28/5/2013
                                                  500,000                  Nil           $2.05            28/5/2013

  7.8      Issued during quarter                       Nil
  7.9      Exercised during quarter                    Nil
 7.10      Expired during quarter                      Nil
 7.11      Debentures                                 N/A
           (totals only)
 7.12      Unsecured notes (totals                    N/A

                                                       Page 8 of 9
Resource Generation Limited
Quarterly Report to 30 September 2012

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.

Sign here: Signed                                           Date: 16 October 2012
                (Company secretary)



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 6.2.

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.

                                        == == == == ==

                                          Page 9 of 9

17 October 2012

JSE Sponsor:
Macquarie First South Capital (Proprietary) Limited

Date: 17/10/2012 08:31:00 Supplied by www.sharenet.co.za                     
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