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Resource Generation Limited - Quarterly Report For The Three Months Ended 30 September 2014

Release Date: 29/10/2014 09:35:00      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 2014

 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 (refer ASX announcement dated 16 December 2010).
 Stage 1 of the mine development targets saleable coal production of 6 million tonnes
 per annum.


Boikarabelo mine construction
Construction of the mine?s infrastructure continued during the quarter, while debt funding
was being finalised, in order to shorten the overall construction time. This included:
   -   construction camp for up to 1,320 persons;
   -   rail link bridges;
   -   power supply infrastructure;
   -   construction office complex;
   -   rail network stabilisation facility (NSF);
   -   earthworks relating to the construction offices, power supply and the NSF;
   -   permanent water supply infrastructure; and
   -   13 kilometres of water pipeline adjacent to public roads.
At the construction camp, services, kitchen and dining facilities have been installed for 1,320
people. Accommodation units have been installed to allow 400 persons to take up immediate
occupation.
Earthworks for the rail link, access roads and provincial roads were suspended early in the
quarter, following the main earthworks contractor being placed into liquidation. Its sub-
contractor for the construction of bridges under and over the rail line has since been
contracted directly and is on target to complete the first three bridges by the end of the
calendar year.
Power supply for the construction process has been connected to the main locations. During
the quarter, a contract was signed with EHL Energy (Pty) Limited to construct 132kv power
transmission lines, a substation and switch room for power supply for the mining operation.
Construction, which will be funded by a deferred payment facility, commenced in September
and is scheduled for completion by October 2015.
The terrace for the construction offices was completed during the quarter. Services are being
installed and office accommodation units are being moved on to site in the current quarter.
The earthworks for the intersection of the rail link to the main line commenced during the
quarter. Once completed, the rail turnouts and associated signalling will be installed. The
design of this intersection is complex, with multiple lines to allow the rearrangement of trains
without delays or stoppages. The rail network stabilisation facility consists of two siding
lines, one loop line and a main line by-pass and eventually will be capable of holding trains
with up to 100 wagons.
Resource Generation Limited
Quarterly Report to 30 September 2014




Permanent water supply infrastructure continued to be installed during the quarter, including
holding tanks and pumping facilities, initially from the main borehole on Zeekoevley. This
infrastructure will be used during the construction of the mine and later will become one of
the main water sources for mine operations.

The Marapong effluent treatment facility in Lephalale, and associated pipeline to
Boikarabelo, is an integral part of the mine?s social and labour plan. During the quarter, a
contract was signed with Ceenex (Pty) Limited to undertake EPCM services for the
construction of the treatment plant, the 58 kilometre pipeline to Boikarabelo and associated
pump infrastructure. Work commenced during the quarter with the completion of two main
road underpasses for the pipeline and initial construction of a 13 kilometre section of the
pipeline adjacent to a main road.

All regulatory consents have been received, all necessary land has been acquired and rail
haulage and port access contracts sufficient for the mine?s stage 1 production have been
signed.

                                      
Coal handling and preparation plant (CHPP)
During the quarter, an engineering, procurement and supply contract was signed with
FLSmidth Roymec (Pty) Limited, the South African black economic empowerment
subsidiary of FLSmidth & Co, the leading supplier of complete plants, equipment and
services for the global minerals industry. Commencement of fabrication and supply is
conditional on completion of debt funding. Meanwhile all detailed designs and specifications
have been completed. In early October, a construction management contract was also signed
with FLSmidth to manage the on-site mechanical and electrical installations for the CHPP.

Mobile equipment
During the quarter, Resource Generation signed a loan facility of up to US$113 million for
the full cost of the mobile equipment fleet with Komatsu Financial Limited Partnership. The
term is five years from the first utilisation date. There are a number of conditions precedent
for the loan including signing the sale agreement for the equipment, registration of security
over the equipment and securing the balance of the debt required to complete project
construction. Resource Generation will be purchasing the equipment from Komatsu Southern
Africa Pty Ltd and the contract for that is close to completion.

Debt funding status
Debt funding of US$400 million is being sought to fund the construction of all site
infrastructure and the rail link, including a contingency. Project funding negotiations are still
underway with banks and others to provide final funding offers. Noble Group?s loans, which
have been announced previously may form part of a consortium?s debt finance, which is
expected to have export credit agency support.

Offtake contracts
Three long-term export offtake contracts have been entered into with CESC, Valu
Investments and Noble Group. These contracts underwrite most of the forecast revenue from
Boikarabelo?s stage 1 production and a substantial portion of stage 2 production.
A domestic offtake contract for 3.0 million tonnes per annum of middlings coal has been
entered into with Noble Group for the first eight years of production.
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.


Mining tenements
The coal mining rights and exploration tenements held at the end of the quarter were as
follows in South Africa (Waterberg):
-    MPT15/2012 MR (74%)
-    PR720/2007 (74%)
-    PR678/2007 (74%)
The company has no interest in farm-in or farm-out agreements.

Corporate
Cash reserves at 30 September 2014 were $45.9 million.

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
* This information was prepared and first disclosed under the JORC Code 2004. It has not been updated since to comply
with the JORC Code 2012 on the basis that the information has not materially changed since it was last reported.
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, 31/9/2001.



  Name of entity
  Resource Generation Limited

  ABN                                                                              Quarter ended (?current quarter?)
  91 059 950 337                                                                            30 September 2014


  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                                  (124)                       (124)
                             (b) development                                               (7,615)                     (7,615)
                             (c) production                                                       -                           -
                             (d) administration                                              (522)                       (522)
1.3       Dividends received                                                                      -                           -
1.4       Interest and other items of a similar nature received                                255                         255
1.5       Interest and other costs of finance paid                                              (1)                         (1)
1.6       Income taxes paid                                                                       -                           -
1.7       Other-forfeited Blumont deposit                                                         -                           -
          Net Operating Cash Flows                                                         (8,007)                     (8,007)

          Cash flows related to investing activities
1.8       Payment for purchases of: (a) prospects                                                 -                            -
                                     (b) equity investments                                       -                            -
                                       (subsidiary)
                                     (c) other fixed assets                                  (292)                       (292)

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                                           -                            -
          acquisitions and borrowings
                                                                                             (292)                       (292)
          Net investing cash flows


1.13      Total operating and investing cash flows (carried
                                                                                           (8,299)                     (8,299)
          forward)



                                                                    Current quarter   Year to date (3 mths)
                                                                       $A?000                $A?000
 1.13      Total operating and investing cash flows (brought
                                                                            (8,299)                   (8,299)
           forward)
           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)                                                    (48)                      (48)


           Net financing cash flows                                            (48)                      (48)

           Net increase (decrease) in cash held                             (8,347)                   (8,347)

 1.20      Cash at beginning of quarter/year to date                         54,337                    54,337
 1.21      Exchange rate adjustments to item 1.20                              (46)                      (46)
 1.22      Cash at end of quarter                                            45,944                    45,944

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.
Two binding term sheets have been entered into with the Noble Group. A US$55.3 million loan is available for
the construction of the rail link and a US$65 million loan is available for site infrastructure. US$20 million has
been drawn down from the rail link loan.
                                                                  Amount available             Amount used
                                                                       $A?000                    $A?000
 3.1       Loan facilities                                                       137,454               22,046

 3.2       Credit standby arrangements                                                 -                      -


    Estimated cash outflows for next quarter
                                                                                                    $A?000
   4.1    Exploration and evaluation                                                                   (20)

   4.2    Development                                                                              (13,877)
   4.3    Production                                                                                        -
   4.4    Administration                                                                              (516)

          Total                                                                                    (14,413)



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                                                50                       63

    5.2   Deposits at call                                                  45,398                  53,888

    5.3   Bank overdraft                                                           -                        -

    5.4   Other (Contract retentions)                                            496                    386

          Total: cash at end of quarter (item 1.22)                         45,944                  54,337




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              581,380,338         581,380,338             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
                issues
           (b) Decreases through
                 securities matured,
                 converted
  7.7      Options (description                        Nil
           and conversion factor)
  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
           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: 29 October 2014
                (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.

29 October 2014
Sydney

JSE Sponsor
Macquarie First South Capital Proprietary Limited 
Date: 29/10/2014 09:35:00 Supplied by www.sharenet.co.za                     
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