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Resource Generation Limited - Quarterly Report For The Three Months Ended 30 June 2016

Release Date: 12/07/2016 08:37:00      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
(?Resource Generation? or the ?Company?)

                                  Quarterly Report
                      for the three months ended 30 June 2016

 Resource Generation Limited (the ?Company?) is developing its Boikarabelo coal mine in
 the Waterberg region of South Africa. This region accounts for 40% of the country?s
 remaining identified coal resources. There are probable reserves of 744.8* million tonnes
 of coal on 35% of the tenements under the Company?s control (ASX/JSE announcement:
 16 December 2010). Stage 1 of the mine development targets saleable coal production of
 6 million tonnes per annum.

The work of the Technical Committee, established by the Board in December 2015 to review
all aspects of the project, has now been substantially completed. A new execution strategy has
been adopted that will reduce the capital cost of the project and reduce risk through the
appointment of established EPC contractors with good track records and substantial balance
sheets. A new mining plan has been developed which will maximize recovery of the coal
deposit by mining all seams and minimize out-of-pit dumping of waste, resulting in increased
productivity and reduced operating costs. All efforts at the mine are now being directed towards
having the project ready for mobilization of the first of the EPC contractors in Q4 2016.

EPC Contractors
A Heads of Agreement was concluded with Sedgman Limited (ASX/JSE Announcement: 6
May 2016) for the procurement and construction of the coal handling plant for a lump sum
fixed price of US$141 million. This represents a substantial saving over the previously
announced estimate of US$200 million.

A Request for Information was issued to seven established mining contract companies in March
2016. All seven responded and a Request for Proposal was delivered to a short list of three
candidates at the beginning of June 2016 with the appointment of the mining contractor
expected during July 2016.

Chief Operations Officer
Mr Zirk van der Bank was appointed as COO of Ledjadja Coal, the main operating subsidiary
(ASX/JSE Announcement: 3 June 2016). Mr van der Bank is an experienced mining engineer
with more than 20 years' experience in the coal mining industry. He has held a range of
supervisory and management positions at Sasol Mining, Moolman Mining, Shanduka Coal and
Glencore Coal SA.

Project Funding

                                          Page 1 of 8
                                                                   Resource Generation Limited
                                                                  Quarterly Report to 30 June 2016

Further progress has been made towards securing the requisite debt funding to complete
construction of the project. The base case financial model (?BCFM?) has now been completed
by the lead arranger and, based on the information contained in the BCFM, the project is
believed to be fundable without recourse to the shareholders for further equity.

Development of a preferred capital structure is at an advanced stage and is currently being
negotiated with all members of the debt club referred to in previous quarterly reports. The
Board remains confident that the Company is on course to finalize the debt funding so that the
balance of construction may commence during the last quarter of 2016.

In parallel with the proposed debt club funding, the Company is investigating a high level offer
of funding received from a source in the United States.

Cash reserves as at 30 June 2016 were $A12.0 million.

A concept feasibility study for a 300MW coal fired power station (?IPP?) has been received
and reviewed. There is a very compelling economic case for a mouth-of-mine IPP with sale of
the electricity produced to the national utility or a private offtaker. The study does however
indicate that 300MW IPP is not optimal and that 450MW or 600MW presents a more
compelling economic case. This option is now being investigated.

Infrastructure arrangements
Negotiations with Transnet Freight Rail concerning the tariff, access to Richards Bay Coal
Terminal and construction of the rail link are proceeding in a very positive manner. An early
resolution of these issues is expected.

Mining tenements
The coal mining rights and exploration tenements held at the end of the quarter were as follows:

.   MPT15/2012 MR (74%)
.   PR720/2007 (74%)
.   PR678/2007 (74%)

The Company has no interest in farm-in or farm-out agreements.
The Company is in the process of relinquishing PR720/2007, over the properties Lisbon and
Zoetfontein, as these are distant from the Boikarabelo site and contain minimal resources that
have not been included in the stated JORC resource.
The Mining Right Application for Kubu, adjacent to Boikarabelo, was lodged at the end of
2015. Kubu was previously known as Waterberg No 1 and encompasses the farm Koert Louw
Zyn Pan (PR678/2007).
On behalf of the Board of Directors
Yours faithfully

Mike Meintjes
Company Secretary

                                          Page 2 of 8
                                                                                         Resource Generation Limited
                                                                                        Quarterly Report to 30 June 2016


Corporate information
Denis Gately                            Non-Executive Chairman
Lulamile Xate                           Non-Executive Deputy Chairman
Robert Croll                            Non-Executive Director
Colin Gilligan                          Non-Executive Director
Leapeetswe Molotsane                    Non-Executive Director
Dr Konji Sebati                         Non-Executive Director

Company secretary
Mike Meintjes

Registered office
Level 1, 17 Station Road
Indooroopilly, QLD 4068, Australia

Telephone:          +27 12 345 1057
Facsimile:          +27 12 345 5314
Website:            www.resgen.com.au

Mailing address
                 South Africa                                                  Australia
 PO Box 5384                                                    PO Box 126
 Rietvalleirand 0174                                            Albion
 Gauteng, South Africa                                          QLD 4010, Australia

Denis Gately
Rob Lowe

                South Africa                                                     Australia
 Russell and Associates                                         Citadel MAGNUS (Martin Debelle)
 t: +27 11 880 3924                                             t: +61 2 8234 0100 m: +61 409 911 189
 42 Glenhove Rd, Johannesburg 2196,                             Level 15, 61 York Street, Sydney,
 Gauteng, South Africa                                          NSW 2000, Australia

* 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.

                                                        Page 3 of 8
                                                                                                Resource Generation Limited
                                                                                               Quarterly Report to 30 June 2016

                                                        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 2016

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                                     -                            -
                             (b) development                                              (1,152)                     (6,970)
                             (c) production                                                     -                            -
                             (d) administration                                           (1,186)                     (7,172)
1.3       Dividends received                                                                    -                            -
1.4       Interest and other items of a similar nature received                                33                         203
1.5       Interest and other costs of finance paid                                            (2)                          (7)
1.6       Income taxes paid                                                                     -                            -
1.7       Other                                                                                20                           20
          Net Operating Cash Flows                                                        (2,287)                    (13,926)

          Cash flows related to investing activities
1.8       Payment for purchases of: (a) prospects                                                  -                         -
                                     (b) equity investments                                        -                         -
                                     (c) other fixed assets                                  (161)                    (1,090)

1.9       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- Mining related deposit                                                            -                         -
                                                                                             (161)                    (1,090)
          Net investing cash flows

1.13      Total operating and investing cash flows (carried
                                                                                          (2,448)                    (15,016)

                                                                   Page 4 of 8
                                                                                  Resource Generation Limited
                                                                                 Quarterly Report to 30 June 2016
                                                                     Current quarter   Year to date (12 mths)
                                                                        $A?000                $A?000

  1.13      Total operating and investing cash flows (brought
                                                                             (2,448)                  (15,016)
            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                                            (685)                   (1,935)
  1.18      Dividends paid                                                         -                         -
  1.19      Other (BEE Loan)                                                       -                      (95)

            Net financing cash flows                                           (685)                   (2,030)

            Net increase (decrease) in cash held                             (3,133)                  (17,046)

  1.20      Cash at beginning of quarter/year to date                         14,716                   28,548
  1.21      Exchange rate adjustments to item 1.20                               372                      453
  1.22      Cash at end of quarter                                            11,955                   11,955

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                              202

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

  1.25       Explanation necessary for an understanding of the transactions
             Directors' remuneration and consulting 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.
Note 1 US$20 million was drawn down as an unsecured loan from Noble Group in March 2014. It is repayable
in quarterly instalments of capital and interest over 8 years commencing in February 2017 and has an annual
interest rate of 10.75%.
Note 2 EHL Energy (Pty) Limited are building the electricity sub-station at the Boikarabelo mine which connects
the mine to the grid. The construction is subject to a deferred payment plan, with interest payable at the ABSA
Bank prime lending rate plus 3%. The loan is unsecured and repayable in 16 quarterly instalments from November
2015. There are 13 quarterly instalments remaining to be paid as at 30 June 2016.

                                                       Page 5 of 8
                                                                               Resource Generation Limited
                                                                              Quarterly Report to 30 June 2016
                                                                 Amount available             Amount used
                                                                    $A?000                      $A?000
  3.1      Loan facilities
                ?    Unsecured loan (Note 1 above)                                26,878               26,878
                ?    Unsecured loan (Note 2 above)                                 6,099                6,099

  3.2      Credit standby arrangements                                                 -                       -

Estimated cash outflows for next quarter
4.1     Exploration and evaluation                                                                             -

4.2     Development                                                                                  (28,303)
4.3     Production                                                                                             -
4.4     Administration                                                                                 (1,073)

        Total                                                                                        (29,376)

Note 1 Development expenditure above is based on securing debt funding in September 2016 so that
first drawdowns can occur to allow for mobilisation to commence and up-front CPP payments to be

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                                                  25                          25

 5.2    Deposits at call                                                   11,860                      14,607

 5.3    Bank overdraft                                                             -                           -

 5.4    Other (Contract retentions)                                               70                          84

        Total: cash at end of quarter (item 1.22)                          11,955                      14,716

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 6 of 8
                                                                                        Resource Generation Limited
                                                                                       Quarterly Report to 30 June 2016

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   securities                    N/A
  7.2       Changes during quarter                      N/A
            (a) Increases through
            (b) Decreases
                through returns of
                capital, buy-backs,
  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
            (b) Decreases through
                  securities matured,
   7.7      Options (description and             6,250,000                   Nil   The value                      Nil
            conversion factor)                                                     attached to the
            Performance share rights                                               performance
            are granted under the                                                  share right is
            Long Term Incentive                                                    the share price
            Plan for no consideration                                              on the day of
            and vest over periods                                                  issue.
            ranging from one to three
            years with non-market
            based performance
            hurdles. Performance
            hurdles are linked to key
            development milestones.
   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 7 of 8
                                                                     Resource Generation Limited
                                                                    Quarterly Report to 30 June 2016

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: 12 July 2016
               (Company secretary)

Print name:    MIKE MEINTJES

JSE Sponsor: Deloitte & Touche Sponsor Services (Pty) Ltd


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

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 8 of 8

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