RESOURCE GENERATION LIMITED - Board report to shareholdersRelease Date: 26/02/2016 07:10:00 Code(s): RSG
Resource Generation Limited
Registered in Australia under the Corporations Act, 2001 (Cth) with
registration number ACN: 059 950 337
Share Code on the ASX: RES
Share Code on the JSE: RSG
(?Resource Generation? or the ?Company?)
26 February 2016
BOARD REPORT TO SHAREHOLDERS
Dear fellow shareholders
I am pleased to take this opportunity to update you on developments since my last report from the board on
16 December 2015.
At its meeting in Johannesburg on 18 February 2016, your board received detailed reports from the interim
CEO and from the Technical Committee, appointed by the board at its December 2015 meeting, with a
mandate to review all aspects of the Boikarabelo project. I am pleased to report that substantial progress has
been made on all material fronts.
Work undertaken by the Technical Committee resulted in the following recommendations:
. a different approach to the Boikarabelo Coal resource which can achieve a better opportunity than
previously expected following a review of the geological model by an independent expert;
. a revised mining plan based on selective mining and in-pit dumping with the aim of maximizing
productivity and reducing operating costs;
. a project development strategy that transfers mine construction risk by the appointment of a small
number of reputable EPC contractors with substantial balance sheets, allowing for recourse in the
event of failure or delay, and managed by a small in-house specialist team; and
. a strategy to reduce capital costs and minimize risk by appointing a suitably qualified contract miner.
An international search agent has been engaged to identify ?best in class? candidates to be appointed to the
South Africa-based in-house specialist team referred to above. A short list of candidates is expected before
the end of February.
The work undertaken to date by the Technical Committee has given the board confidence in the execution of
the project post completion of the debt funding and the economic viability of the project after first production
Resource Generation Limited (ACN 059 950 337) www.resgen.com.au
c/o Level 1, 17 Station Road, Indooropilly, QLD, 4068
GPO Box 126, Albion 4010 QLD. Phone +61 2 9376 9000
As reported in today?s ASX Funding Update, substantial progress has been made with regard to the
Boikarabelo project funding. All funding options have been explored. Currently, the only credible option
available is that proposed by the debt club established by the previous board. FirstRand Bank Limited, acting
through its Rand Merchant Bank division has been appointed lead arranger and work on a new base case
financial model and term sheet has begun based on the recommendations of the Technical Committee. The
support that we have received from all members of the debt club continues to be positive and encouraging.
Although the project funding process necessarily takes time to complete, we have a high degree of
confidence in achieving a successful outcome.
In parallel, we will continue to explore any other funding options available, including one recently received
from a credible source in the United States of America.
In order to expand the economic base of the Boikarabelo project, we are fast tracking the preparation of a
bankable feasibility study for the construction of a 260MW independent mine-mouth power station to operate
as an approved independent power producer (?IPP?). The project has already received the environmental
and land use approvals required for the IPP. Should the feasibility study confirm economic viability,
construction of the IPP will provide us with optionality with regard to our domestic coal production and an
additional revenue stream. The project would also transit the Company from the coal sector to the energy
sector. Supply agreements with both the public and private sectors are being explored.
Our relationships with key stakeholders in South Africa including Department of Mineral Resources and
Transnet Freight Rail (?TFR?) continue to develop in a positive manner. Discussions with TFR concerning the
project?s access to the Richards Bay Coal Terminal are in progress. If these negotiations result in a positive
outcome our costs of logistics will be substantially reduced from earlier plans.
While the Technical Committee and project funding initiatives are in progress, little construction work is
required at the mine. The focus at site is on maintenance of the facility and structures already completed and
continuation of the environmental and social responsibility programs.
The board approved a minimum two year employment contract with Rob Lowe as Chief Executive Officer
and approved the appointment of Brendan O?Regan as Chief Financial Officer. See addendum for salient
terms of the CEO?s contract.
The company has now closed the Sydney office and is seeking to sub-lease the office space. Effective 22
February 2016, the Company?s registered office, postal address and principal place of business will be as
Registered Office Principal Place of Business
c/o David B Overell Pty Ltd Unit Two Carrera House
Level 1, 17 Station Road 15 Sovereign Drive
Indooropilly, QLD 4068 Route 21 Corporate Office Park
Australia Irene Gauteng 0157
PO Box 5384
PO Box 126 Rietvalleirand 0174
Albion Pretoria South Africa
Australia Tel +27 (012) 345 1057
Fax +27 (012) 345 5314
I concluded my previous report stating the board?s belief that the Boikarabelo Coal Mine had a compelling
case for development and offered significant opportunities for all stakeholders. This belief has only been
reinforced by the results produced to the board of the work undertaken to date by the new management
The next scheduled board meeting is to be held on19 May 2016 and I intend to provide you with a further
report at that time, if not before.
For and on behalf of the Board
JSE Sponsor: Deloitte & Touche Sponsor Services (Pty) Ltd
CEO Contract Terms
The Company, in accordance with ASX Listing Rule 3.16.4 advises that the following is a summary of the
terms of the employment contract agreed with Rob Lowe
. Effective 26th November 2015 and shall remain in force and effect until terminated in accordance
with the provisions below.
. Subject to a minimum term of 2 years the Company may terminate the contract for misconduct, poor
work performance, incapacity or operational requirements. Subject to the minimum term either party
may terminate the employment contract by serving the other with one calendar month notice.
. Total fixed remuneration AUD800,000 (inclusive of superannuation).
. Participation in a bonus scheme under which there is the opportunity to earn a maximum of 50% of
fixed remuneration subject to key performance indicators including inter alia completion of the
Company?s debt funding arrangements, commencement of construction before the end of quarter 3
of 2016 and performance of the Company?s share price. The award of such bonus being in the
absolute discretion of the Remuneration Committee
. The Company may issue the employee with performance shares as determined by the Board from
time to time.
Date: 26/02/2016 07:10:00 Supplied by www.sharenet.co.za
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