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Resource Generation Limited - Quarterly Report For The Three Months Ended 31 March 2013

Release Date: 17/04/2013 09:05:00      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 31 March 2013

 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.

PRESENT STATUS
-   Mine construction activities have commenced, with the site now classified as an
    operating mine site. Initial activities encompass site infrastructure, roadworks and water
    and power connections.
-   A strategic partnership has been entered into with Noble under which
    -   Noble acquired a 7.5% shareholding at 40c per share;
    -   A US$123 million loan facility has been provided by Noble;
    -   Noble has entered into a 35 year off-take contract; and
    -   Noble has been appointed the supply chain manager and exclusive marketing agent
        for Boikarabelo.
-   Due to the delay experienced prior to the receipt of the project finance offers, a secured
    debenture was issued to the Noble Group (Noble) to raise $20 million cash to augment
    available funding and commence initial construction activities at Boikarabelo.
-   The financiers mandated to provide a project finance facility for the development of the
    Boikarabelo coal mine provided credit-approved offers of project finance. The offers
    deviated from the agreed terms sheet credit approvals for the facility and included
    commercial conditions which are unacceptable to the company. Negotiations on these
    conditions are continuing.
-   Funding is being undertaken in stages, including equipment finance and utilisation of
    Noble?s debt facility as a platform for continuing to secure project funding. An
    equipment finance facility offer has been received from Caterpillar Finance for the
    mobile equipment and negotiations are underway to finalise the terms, which if not
    resolved will lead to the equipment being tendered to the major manufacturers. Tenders
    have also been released for the materials handling equipment, which include finance
    optionality. Discussions are proceeding with financial institutions to join Noble for a
    debt facility.

-   Key achievements to date have been:
    - Obtaining a 30 year mining right.
    - 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 bore water from the
      company?s properties, which will be sufficient for stage 1 of operations.
    - A rail haulage contract with Transnet with confirmed allocation to meet export and
      domestic sales requirements for stage 1 of operations.
     - A port access contract which is sufficient for stage 1 export requirements.
     - Three significant export contracts to supply thermal coal to Indian customers and a
       global trader.
     - Acquisition of all land required for the mine and for the rail link.
     - Sufficient power supply arranged for stage 1 of operations.
     - A fully compliant BEE structure.
     - A strategic partnership with Noble.
-   The project?s sovereign risk has been minimised as a result of overcoming all major
    regulatory hurdles faced by the company.
-   The Waterberg region accounts for 40% of South Africa?s remaining coal resources and
    Boikarabelo has probable reserves of 744.8 million tonnes* on 35% of its tenements.

PROGRESS DURING THE QUARTER

Noble Debenture and Offtake Contract
Early in the quarter, a secured debenture was issued to Noble to raise $20 million cash to
augment available funding and commence initial construction activities at Boikarabelo.

A third export coal offtake contract for the Boikarabelo project was also entered into with
Noble for the supply of 2.5 million tonnes of coal over a five year period, after production
commences at the Boikarabelo mine. Coal prices will be set by reference to an
internationally recognised index at the time of each shipment.

Financing Syndicate Progress
The financiers mandated to provide a project finance facility for the development of the
Boikarabelo coal mine provided credit-approved offers of project finance during the quarter.
The offers deviated from the agreed terms sheet for credit approvals for the facility and
included commercial conditions which are unacceptable to the company. Negotiations on
these conditions are continuing.

Resource Generation thus announced that it is considering alternative sources of funding to
construct Boikarabelo. This process will allow greater flexibility and without contingencies
and costs associated with debt funding, capital expenditure is estimated at $530 million,
which includes $100 million for mobile equipment. By securing finance from alternative
sources to part-fund this expenditure, the company will have flexibility to raise the remaining
capital required to complete construction of the mine by way of equity or debt at a later time.
The US$123 million loan from Noble (refer below) and the Caterpillar equipment finance
offer are the first steps towards completing funding.

Strategic Partnership with Noble
In addition to subscribing for 7.5% of Resource Generation?s equity at $0.40 per share at the
end of the quarter, Noble has agreed to provide Resource Generation with a secured loan
facility of up to US$123 million on normal commercial terms. The facility can be drawn
down until 31 December 2013 and will be repayable 21 months after the first draw-down.
This loan facility is in addition to the $20 million secured debenture issued to Noble in
January 2013.
                                   
Noble has increased the tonnages and term of the off-take contract agreed earlier from 2.5
million tonnes which was to be supplied over five years to the following:

                             Delivery Period         Annual Quantity
                                                        (Tonnes)
                                 Years 1-8               500,000
                                Years 9-12              1,500,000
                                Years 13-14             2,000,000
                                Years 15-35             2,500,000

Prices will be set by reference to an internationally recognised index at the time of each
shipment.

Resource Generation has also entered into an exclusive supply chain management and
marketing agreement with Noble under which Noble will manage the supply chain and
marketing of Boikarabelo?s domestic and export coal sales for 35 years.

Physical Progress on Site
Mine construction activities commenced at Boikarabelo in mid-February, with the site now
classified as an operating mine site. Initial activities encompass site infrastructure, roadworks
and water and power connections. Good progress has been made to date. Depicted below are
some of the local workforce of equal gender split, who are employed in the mine
construction.




Preparation for Construction
Together with the EPCM providers for the construction of the mine, tenders have been issued
for longer lead time items and packages for the early stages of construction. Aveng E+PC is
assisting the company with the preparation plant designs and associated tenders. RSV Enco
is assisting the company with the infrastructure designs and associated tenders, including for
the mobile equipment, which will be released shortly.

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


CORPORATE
Cash reserves at 31 March 2013 were $25.7 million. These funds are after receiving $20
million from Noble through a secured debenture and $8.5 million raised by way of an equity
placement to Noble at $0.40 per share.



CORPORATE INFORMATION

Directors
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

Contacts
Paul Jury
Steve Matthews

Media
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
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 March 2013


  Consolidated statement of cash flows
                                                                                  Current quarter      Year to date (9 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                                     (5)                        (43)
                             (b) development                                               (1,993)                      (7,916)
                             (c) production                                                       -                            -
                             (d) administration                                              (811)                      (1,550)
1.3       Dividends received                                                                      -                            -
1.4       Interest and other items of a similar nature received                                147                          404
1.5       Interest and other costs of finance paid                                              (5)                          (8)
1.6       Income taxes paid                                                                       -                            -
1.7       Other (provide details if material)                                                     -                            -
          Net Operating Cash Flows                                                        (2,667)                       (9,113)

          Cash flows related to investing activities
1.8       Payment for purchases of: (a) prospects                                                -                            -
                                     (b) equity investments                                      -                            -
                                     (c) other fixed assets                                (6,347)                      (6,817)
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                                       129                          860
          acquisitions,    borrowings    and development
          expenditure (refundable)
                                                                                           (6,218)                      (5,957)
          Net investing cash flows


1.13      Total operating and investing cash flows (carried
                                                                                           (8,885)                     (15,070)
          forward)

                                                             


                                                                    Current quarter   Year to date (9 mths)
                                                                       $A?000                $A?000
 1.13      Total operating and investing cash flows (brought
                                                                            (8,885)                  (15,070)
           forward)
           Cash flows related to financing activities
 1.14      Proceeds from issues of shares, options, etc.                      8,541                     8,654
 1.15      Proceeds from sale of forfeited shares                                 -                         -
 1.16      Proceeds from borrowings                                          20,000                   20,000
 1.17      Repayment of borrowings                                                -                         -
 1.18      Dividends paid                                                         -                         -
 1.19      Other (BEE Loan)                                                    (54)                   (1,323)
 1.19      Other (Mining Licence Deposit)                                         -                     1,846
 1.19      Other (Cost of Borrowings)                                         (500)                     (500)

           Net financing cash flows                                          27,987                   28,677

           Net increase (decrease) in cash held                              19,102                   13,607

 1.20      Cash at beginning of quarter/year to date                          6,551                   12,116
 1.21      Exchange rate adjustments to item 1.20                                27                     (43)
 1.22      Cash at end of quarter                                            25,680                   25,680

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
                                                                                              $A'000
 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
           N/A

 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
           N/A

Financing facilities available
Add notes as necessary for an understanding of the position.
On 8 January 2013, the company issued a secured debenture to Noble and received $20 million cash to augment
available funding and progress construction activities at its Boikarabelo coal mine. The debenture is repayable
in December 2013. A US$123 million loan facility agreement was entered into with Noble on 28 March 2013.
                                                                  Amount available         Amount used
                                                                       $A?000                $A?000
 3.1       Loan facilities                                                      137,974               20,000

 3.2       Credit standby arrangements                                                 -                      -


                                                    
    Resource Generation Limited
    Quarterly Report to 31 March 2013



    Estimated cash outflows for next quarter
                                                                                                   $A?000
   4.1    Exploration and evaluation                                                                 (261)

   4.2    Development                                                                              (8,179)
   4.3    Production                                                                                      -
   4.4    Administration                                                                             (729)

          Total                                                                                    (9,169)



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                                               10                    203

    5.2   Deposits at call                                                   25,670                  6,348

    5.3   Bank overdraft                                                          -                       -

    5.4   Other (Bank guarantees)                                                 -                       -

          Total: cash at end of quarter (item 1.22)                          25,680                  6,551




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
          relinquished,
          reduced or lapsed

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




                       



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
               issues
           (b) Decreases
               through returns of
               capital, buy-backs,
               redemptions
 7.3       +Ordinary securities              284,698,002         284,698,002             Various           Fully paid

 7.4       Changes during quarter
           (a) Increases                      21,352,350          21,352,350                $0.40               $0.40
               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
               issues
           (b) Decreases through
                securities matured,
                converted
  7.7      Options (description                                                   Exercise price         Expiry date
           and conversion factor)               1,875,000                  Nil           $0.50             7/7/2013
                                                1,875,000                  Nil           $0.50            13/3/2014
                                                  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                 250,000                  Nil             $0.50           17/3/2013
                                                  250,000                  Nil             $0.70           17/3/2013
                                                  350,000                  Nil             $1.00           17/3/2013
                                                  350,000                  Nil             $1.50           17/3/2013
 7.11      Debentures                                N/A
           (totals only)
 7.12      Unsecured notes (totals                    N/A
           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.



Sign here:                                            Date: 18 April 2013
                (Company secretary)

Print name:     STEPHEN JAMES MATTHEWS


Notes

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.

Sydney
17 April 2013

JSE Sponsor:
Macquarie First South Capital (Proprietary) Limited


                              
Date: 17/04/2013 09:05:00 Supplied by www.sharenet.co.za                     
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