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RESOURCE GENERATION LIMITED - Quarterly Report for the three months ended 30 June 2013

Release Date: 26/07/2013 08:46:00      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 June 2013

 Resource Generation is developing its Boikarabelo coal mine in the Waterberg region
 of South Africa, which accounts for 40% of the country?s remaining coal resources.
 There are probable reserves of 744.8* million tonnes of coal on 35% of the tenements
 under the company?s control. Stage 1 of the mine development targets saleable coal
 production of 6 million tonnes per annum.

- Together with funds expected to be received as a result of its 1-for-1 entitlement offer,
    the company has raised finance of $185 million since the beginning of 2013 for
    construction of the mine, its rail link and other infrastructure.
- Construction of Boikarabelo?s mine infrastructure has continued during the quarter,
    underpinned by loan facilities.
- Preparatory construction of the 38 kilometre rail link is due to begin shortly. The rail
    link is financed by a US$55.3 million loan.
- Noble Group has entered into a strategic partnership with the company and acquired a
    7.5% shareholding in Resource Generation at 40c per share, totalling $8.5 million.
- Two pathways are being undertaken to debt fund both the infrastructure and equipment,
    including negotiations with 11 project finance banks.
- As a part of this the company is currently evaluating tenders for the supply and debt
    funding of mobile equipment and materials handling equipment for the coal handling and
    preparation plant.

- Construction is expected to take two years and, subject to agreements on funding,
  production is expected to begin in late 2015.
- All regulatory hurdles have been overcome, all necessary land has been acquired, and the
   company has rail haulage and port access contracts sufficient for Boikarabelo?s stage 1

Offtake contracts
- In July 2013, Valu Investments Pte Ltd entered into a 20 year export offtake contract for
    1.0 million tonnes for annum, increasing to 2.0 million tonnes per annum from the
    beginning of stage 2 production. This has more than replaced a contract with Bhushan
    Steel which has been terminated.
- Noble Group has increased and extended its export offtake contract to 66.5 million
    tonnes over 35 years and also signed a domestic offtake contract for 3.0 million tonnes of
    coal per annum for eight years.
- Together with an earlier contract with CESC, these contracts underwrite most of the
    forecast revenue from Boikarabelo?s stage 1 production.

Resource Generation Limited
Quarterly Report to 30 June 2013


Debt Finance
Negotiations are continuing with the banks which provided credit-approved offers of project
finance for development of the Boikarabelo mine; these were rejected by the board in March
2013 as they included commercial conditions that it believed were not in the best interest of
shareholders. Additional banks have joined this group so that 11 banks are now considering
providing project finance along with the Noble Group.

Meanwhile, there was a strong focus during the quarter on arranging alternative sources of
funding. Tenders were sought for mobile and materials handling equipment, including
finance optionality, and responses, which were received after the end of the quarter, are being
evaluated. Further leveraged funding for the remaining parts of the coal handling and
preparation plant is also being sought.

Finance from such alternative sources to part-fund this expenditure will give the company
flexibility to raise the remaining capital required to complete the mine?s construction through
either equity or debt at a later time.

Rail Link Loan
Resource Generation has signed a binding term sheet for a US$55.3 million loan facility with
Noble Group, which will be used for construction of the Boikarabelo rail link. The 38
kilometre rail link from the Boikarabelo mine to the existing Transnet Freight Rail network is
one of the longer lead time items for the construction of the mine. The loan will have a term
of eight years and security over the rail link and associated servitude rights will be granted to
Noble Group. Construction and loan draw down will commence as soon as possible..

In view of this facility, the parties have agreed to reduce the existing Noble loan facility of
US$123 million by US$55.3 million to US$67.7 million. The other terms of the facility,
which was announced on 2 April 2013, remain the same.

Domestic Offtake Contract
During the quarter, a domestic offtake contract for 3.0 million tonnes per annum of middlings
coal was entered into with Noble Group. The term is for eight years, with supply to begin
after production commences at the Boikarabelo mine. The contract is based on commercial
terms which are expected to facilitate completion of debt funding, whilst maintaining
appropriate returns to shareholders.

New Export Offtake Contract
After the end of the quarter, a new 20 year export coal offtake contract for 1.0 million tonnes
per annum of coal was entered into with Valu Investments Pte Ltd (Valu), with supply
beginning after production commences at the Boikarabelo mine. The volume will increase to
2.0 million tonnes per annum following commencement of stage 2 production. Prices will be
set by reference to an internationally recognised index at the time of each shipment.

Valu is a special purpose vehicle which is jointly owned by Mr Jaimin Vyas, who is an
entrepreneur, investor and project developer in the infrastructure sector, and IL&FS Energy
Development Company Limited (?IEDCL?), an Indian company which specialises in the
energy infrastructure space.

Resource Generation Limited
Quarterly Report to 30 June 2013

The existing 0.5 million tonnes per annum contract with Bhushan Steel Limited has been

The company?s current export coal contracts (in million tonnes per annum) are as follows:
                   Stage 1                Stage 2
                   Y1-Y3      Y4-Y7       Y8      Y9-12      Y13-14    Y15-20     Y21-35    Y36-Y38
 CESC              1.0        2.0         4.0     4.0        4.0       4.0        4.0       4.0
 Noble             0.5        0.5         0.5     1.5        2.0       2.5        2.5
 Valu              1.0        1.0         2.0     2.0        2.0       2.0
 Total             2.5        3.5         6.5     7.5        8.0       8.5        6.5       4.0

 Note. If, as expected, stage 2 production commences earlier, both CESC and Valu tonnages will increase
      earlier by 1.0 mtpa.

IPP Arrangements
After the end of the quarter, Valu has undertaken to conduct feasibility studies for the
proposed development of a 200 MW power station and a larger 1200 MW coal-fired power
station adjacent to the Boikarabelo mine. Resource Generation has granted Valu the right to
own, build and operate both the coal-fired power stations as an independent power project.
In conjunction with this, the feasibility study arrangements with CESC Limited have been

Operational Activities
Initial physical activities at Boikarabelo encompassed site infrastructure, roadworks and
water and power connections. Further works have been initiated on the pad for the base of
the construction camp, associated access roads and other infrastructure for the mobilisation of
site activities.
The commencement of the rail link will be a major catalyst for the construction of the mine.
The knock-on effect of this construction activity is significant in terms of physical site

Regular logistics meetings are being held with Transnet Freight Rail (TFR) to plan the timely
delivery of haulage services following the commencement of production at Boikarabelo.
TFR is making good progress with the first upgrade works on the Thabazimbi line which will
help to ensure initial capacity requirements are met.

- Cash reserves at 30 June 2013 were $21.4 million. Following the end of the quarter, a
  1 for 1 entitlement offer was undertaken which was 16.7% subscribed for and raised
  $10.5 million. The company is currently arranging a placement of the 237.2 million
  shortfall shares with institutional and sophisticated investors. Support is already in place
  for up to 208 million of the shortfall shares from Barsington Limited, Valu Investments
  Pte Ltd and Altius Investment Holdings (Proprietary) Limited (Altius). One of Altius?
  conditions is that settlement should occur after 13 September 2013 so completion of the
  shortfall placement will not occur before then.

Resource Generation Limite
Quarterly Report to 30 June 2013

-    The credit-approved offers of finance received from the mandated project finance banks
     in March 2013 were rejected, as they contained commercial conditions that the board did
     not believe were in the best interests of shareholders. This resulted in the expiry of 6.55
     million performance share rights held by executive directors and senior management on
     30 June 2013.


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

  Resource Generation Limited
  Quarterly Report to 30 June 2013

                                                          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 June 2013

  Consolidated statement of cash flows
                                                                                  Current quarter     Year to date (12 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                                     (3)                        (46)
                             (b) development                                               (2,268)                     (10,185)
                             (c) production                                                       -                            -
                             (d) administration                                              (909)                      (2,454)
1.3       Dividends received                                                                      -                            -
1.4       Interest and other items of a similar nature received                                174                          578
1.5       Interest and other costs of finance paid                                              (1)                          (9)
1.6       Income taxes paid                                                                       -                            -
1.7       Other (provide details if material)                                                     -                            -
          Net Operating Cash Flows                                                         (3,007)                     (12,120)

          Cash flows related to investing activities
1.8       Payment for purchases of: (a) prospects                                                -                            -
                                     (b) equity investments                                      -                            -
                                     (c) other fixed assets                                  (558)                      (7,375)
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                                     1,089                         1,949
          acquisitions,    borrowings    and development
          expenditure (refundable)
                                                                                              531                       (5,426)
          Net investing cash flows

1.13      Total operating and investing cash flows (carried
                                                                                           (2,476)                     (17,546)

Resource Generation Limited
Quarterly Report to 30 June 2013

                                                                    Current quarter   Year to date (12 mths)
                                                                       $A?000                $A?000
 1.13      Total operating and investing cash flows (brought
                                                                            (2,476)                  (17,546)
           Cash flows related to financing activities
 1.14      Proceeds from issues of shares, options, etc.                       (16)                     8,637
 1.15      Proceeds from sale of forfeited shares                                 -                         -
 1.16      Proceeds from borrowings                                               -                    20,000
 1.17      Repayment of borrowings                                                -                         -
 1.18      Dividends paid                                                         -                         -
 1.19      Other (BEE Loan)                                                    (53)                   (1,375)
 1.19      Other (Mining Related Deposits)                                  (1,323)                       523
 1.19      Other (Cost of Borrowings)                                         (455)                     (955)

           Net financing cash flows                                         (1,847)                    26,830

           Net increase (decrease) in cash held                             (4,323)                     9,284

 1.20      Cash at beginning of quarter/year to date                         25,680                    12,116
 1.21      Exchange rate adjustments to item 1.20                                71                        28
 1.22      Cash at end of quarter                                            21,428                    21,428

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.
On 28 June 2013, the company converted US$51.3 million of its US$123 million loan facility agreement with
Noble into a dedicated rail link loan facility. An A$20 million secured debenture was issued to Noble in
January 2013. The debenture is repayable in December 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 30 June 2013

    Estimated cash outflows for next quarter
   4.1    Exploration and evaluation                                                                  (50)

   4.2    Development                                                                              (2,531)
   4.3    Production                                                                                       -
   4.4    Administration                                                                             (435)

          Total                                                                                    (3,016)

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                                               82                       10

    5.2   Deposits at call                                                   21,346                25,670

    5.3   Bank overdraft                                                          -                        -

    5.4   Other (Bank guarantees)                                                 -                        -

          Total: cash at end of quarter (item 1.22)                          21,428                25,680

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

Resource Generation Limited
Quarterly Report to 30 June 2013

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              284,698,002         284,698,002             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)               1,875,000                  Nil           $0.50             7/7/2013
                                                1,875,000                  Nil           $0.50            13/3/2014
  7.8      Issued during quarter                      Nil
  7.9      Exercised during quarter                   Nil
 7.10      Expired during quarter                 375,000                  Nil             $1.55           28/5/2013
                                                  375,000                  Nil             $1.85           28/5/2013
                                                  500,000                  Nil             $2.05           28/5/2013
 7.11      Debentures                                N/A
           (totals only)
 7.12      Unsecured notes (totals                    N/A

Resource Generation Limited
Quarterly Report to 30 June 2013

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: 26 July 2013
                (Company secretary)


26 July 2013

JSE Sponsor:
Macquarie First South Capital (Proprietary) Limited


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.

                                        == == == == ==

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