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RSG - Resource Generation Limited - Quarterly Report for the three months ended

Release Date: 27/01/2012 10:13
Code(s): RSG
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RSG - Resource Generation Limited - Quarterly Report for the three months ended 31 December 2011 Resource Generation Limited ACN 059 950 337 (Incorporated and registered in Australia) (Registration number ACN 059 950 337) Share code on the JSE Limited: RSG ISIN: AU000000RES1 Share code on the Australian Stock Exchange Limited: RES ISIN: AU000000RES1 (JSE short name: "Resgen" or "the Company") Quarterly Report for the three months ended 31 December 2011 Resource Generation is developing its Boikarabelo coal mine in the Waterberg region of South Africa, which has one of the country`s largest remaining coal deposits. The Boikarabelo mine has probable reserves of 744.8 million tonnes of coal on 35% of the tenements under the company`s control. HIGHLIGHTS * MOU signed with Transnet. * Boikarabelo mining right update. * Regulatory approval update. * Agreement signed to secure water for stage 2 of the mine operations * Continued strong interest from financiers for debt funding. SOUTH AFRICA MOU signed with Transnet Ledjadja signed a memorandum of understanding (MOU) with Transnet Freight Rail (TFR) during the quarter. Under the MOU, TFR has agreed to haul Boikarabelo coal on a take or pay basis as follows: 4 million tonnes in the year commencing 1 July 2014, 5 million tonnes in the year commencing 1 July 2015 and 6 million tonnes per annum from 1 July 2016. 50% of the coal will be hauled to export ports and 50% to the Mpumalanga Highveld, which is where Eskom`s power stations are located. Freight rates are yet to be determined but will reflect commercially fair and reasonable terms. Whilst rail capacity currently exists, upgrade works on the existing line between Lephalale and Pyramid South have been identified and need to be completed before coal haulage can commence. Ledjadja has agreed to undertake the upgrade works if TFR agrees. These works are minor and able to be completed prior to the forecast commencement of mining. Ledjadja has also agreed to work with TFR to unlock additional capacity from the Waterberg. The haulage agreement is conditional upon Boikarabelo commencing to produce coal, the upgrade works being completed and the rail link from Boikarabelo to the existing network being completed. The rail link is part of the capital expenditure of the Boikarabelo mine and ownership and operations of the rail link will be transferred to TFR in due course with compensation to be negotiated. The rail link is intended to be a common user facility. The agreement is also conditional on TFR completing its Waterberg Feasibility Study aimed at unlocking a potential haulage capacity of 22.5 million tonnes per annum from the Waterberg and formal allocation of capacity by TFR. Ledjadja submitted a draft long term coal haulage agreement based on TFR`s standard terms and conditions on 18 November 2011. Communications are occurring and TFR`s recent announcements of infrastructure upgrades to expand the Waterberg network have been welcomed. Mining right update As previously advised, the appeal that was lodged with the South African Department of Mineral Resources (DMR) against the 30 year mining right, does not suspend the mining right, which remains valid. The statutory appeal process is underway and Ledjadja provided its formal response to the DMR in the previous quarter. The DMR`s communication of its response to the appellants is awaited. The company is confident that the mining right will be confirmed and is continuing its normal activities to develop the mine. Regulatory approval update Ledjadja applied for approval under the National Environmental Management Act (NEMA) in January 2011 for construction of the mine infrastructure and the 36 kilometre rail link route from the Boikarabelo mine to the existing Transnet rail line. Public consultation and administrative reviews progressed without any material issues; however minor variations to the application resulted in departmental processes requiring a second environmental impact assessment, which has delayed the expected NEMA approval until early 2012. The application for an Integrated Water Use Licence (IWULA) in December 2010 has also progressed to a mature stage. Agreement signed to secure water for stage 2 of the mine operations An agreement was signed during the quarter with the Lephalale Local Municipality (LLM) in Limpopo Province which will secure the water required for stage 2 of the company`s planned Boikarabelo mine. Under the contract, which is subject to a number of conditions, the company will construct, operate and maintain a wastewater treatment plant at Marapong, approximately 50 kilometres from Boikarabelo. This will treat municipal effluent and generate up to 16 megalitres of water per day, which will be pumped to the mine site via a new pipeline. Resource Generation has been working with LLM for two years on plans for the plant, which will provide LLM with essential infrastructure. This is a key responsibility which the company`s black empowered subsidiary, Ledjadja Coal (Pty) Limited, committed to undertake as part of its social and labour plan for the Boikarabelo mine. The key terms of the agreement with LLM are as follows: * The term is 30 years from the date of grant of the water use licence by the Department of Water Affairs, subject to satisfaction of a number of conditions. The conditions include an environmental impact assessment being approved by relevant government departments by 28 February 2013, sufficient power supply being secured by LMM, and all other required government approvals (including NEMA approval) being obtained by 28 February 2013. An extension of time is possible should delays be experienced. * Resource Generation will pay for the Marapong wastewater treatment plant upgrade works and expansion works to extend capacity to 4 megalitres per day by January 2014, increasing to 16 megalitres per day by January 2017. It will also construct the Marapong -Boikarabelo effluent transfer pump station and associated works including the transfer pipeline. * Resource Generation will manage, operate and maintain the treatment plant after the expansion at its own cost until the operations transfer date, which is one year after completion of the expansion works. At that time LLM will become responsible for management, operation and maintenance of the plant. * From 1 January 2014, the Boikarabelo mine will be supplied with a minimum of 4 megalitres of treated effluent per day and from 1 January 2017 a maximum of 16 megalitres per day. * From the operations transfer date, Resource Generation will continue to pay for the operation and maintenance costs. The company will also pay for insurance for the plant for the term of the agreement. Continued strong interest from financiers for debt funding Potential debt funders have confirmed their continued strong interest in providing project finance for the development of the Boikarabelo mine. Completion of the financiers` due diligence is subject to satisfactory arrangements with both TFR and Eskom. The company is working toward contractual arrangements with both of these parties. Drilling activities Five large diameter core holes were drilled on the Kalkpan property which will be the commencement point for the Boikarabelo open cut mine pit. A sixth hole is due to be completed in February. These large cores are being used to obtain a greater understanding of the coal qualities and washability data of the Boikarabelo coal. This information is necessary to fine tune the design of the coal preparation plant and to add to the information being provided to Eskom to supplement the earlier successful test burn results. Two core holes were drilled on each of the three Waterberg One Coal properties as part of the requirements for maintenance of the prospecting rights. Results were as expected and do not alter the earlier interpretations of resources and reserves. CAMEROON There was no activity during the quarter on Resource Generation`s uranium tenements in Cameroon. 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 JSE Sponsor: Deloitte & Touche Sponsor Services (Pty) Limited * 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 December 2011 Consolidated statement of cash flows Current Year to date Cash flows related to operating activities quarter (6 mths) $A`000 $A`000 1.1 Receipts from product sales - - and related debtors
1.2 Payments for (a) (291) (291) exploration and evaluation (1,766) (3,167) (b) development - - (c) production (671) (1,342)
(d) administration 1.3 Dividends received - - 1.4 Interest and other items of a 318 603 similar nature received
1.5 Interest and other costs of (2) (4) finance paid 1.6 Income taxes paid - - 1.7 Other (provide details if - - material) Net Operating Cash Flows (2,412) (4,201) Cash flows related to
investing activities 1.8 Payment for purchases of: - - (a) prospects - - (b) equity investments (79) (79)
(c) other fixed assets 1.12 Proceeds from sale of: (a) - - prospects - - (b) equity investment (38) 1,500
- - (subsidiary) (c) other fixed assets 1.10 Loans to other entities - - 1.11 Loans repaid by other entities - - 1.12 Other- Government charges in 57 454 relation to land acquisitions (refundable)
(60) 1,875 Net investing cash flows 1.13 Total operating and investing (2,472) (2,326) cash flows (carried forward)
Current Year to date quarter (6 mths) $A`000 $A`000 1.13 Total operating and investing (2,472) (2,326) cash flows (brought forward) Cash flows related to 1.14 financing activities - - 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) - (1,283)
Net financing cash flows - (1,283) Net increase (decrease) in (2,472) (3,609) cash held
1.20 Cash at beginning of 23,685 25,322 quarter/year to date 1.21 Exchange rate adjustments to (388) (888) item 1.20
1.22 Cash at end of quarter 20,825 20,825 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 272 parties included in item 1.2 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. Amount available Amount used $A`000 $A`000 3.1 Loan facilities - - 3.2 Credit standby arrangements - - Estimated cash outflows for next quarter $A`000 4.1 Exploration and evaluation (210) 4.2 Development (1,983) 4.3 Production - 4.4 Administration (637) Total (2,830) Reconciliation of cash Reconciliation of cash at the end of Current quarter Previous quarter the quarter (as shown in the $A`000 $A`000 consolidated statement of cash flows) to the related items in the accounts is as follows. 5. Cash on hand and at bank 32 443 1 5. Deposits at call 20,453 22,788 2 5. Bank overdraft - - 3 5. Other (Bank guarantees) 340 454 4 Total: cash at end of quarter 20,825 23,685 (item 1.22) Changes in interests in mining tenements Tenement Nature of Interest Interest at reference interest at end of beginning quarter of quarter
6.1 Interests in N/A N/A N/A N/A mining tenements relinquished, reduced or lapsed 6.2 Interests in N/A N/A N/A N/A mining tenements acquired or increased Issued and quoted securities at end of current quarter Description includes rate of interest and any redemption or conversion rights together with prices and dates. Total number Number Issue Amount paid
quoted price per up per security security ($) ($) 7.1 +Preference N/A securities (description) 7.2 Changes during N/A quarter Increases through issues Decreases through returns of capital, buy- backs, redemptions 7.3 +Ordinary 262,895,652 262,895,652 Various Fully paid securities 7.4 Changes during quarter Nil Increases through issues Nil Decreases through returns of capital, buy- backs 7.5 +Convertible debt N/A securities (description) 7.6 Changes during N/A quarter Increases through issues Decreases through securities matured, converted 7.7 Options Exercise Expiry date (description and 450,000 Nil price 28/11/2012 conversion 1,875,000 Nil 31/12/2012 factor) 1,875,000 Nil $0.25 7/7/2013 250,000 Nil 17/3/2013 450,000 Nil $0.50 28/11/2012
250,000 Nil 17/3/2013 350,000 Nil $0.50 17/3/2013 350,000 Nil 17/3/2013 375,000 Nil $0.50 28/5/2013
375,000 Nil 28/5/2013 500,000 Nil $0.60 28/5/2013 $0.70
$1.00 $1.50
$1.55 $1.85
$2.05 7.8 Issued during Nil quarter 7.9 Exercised during Nil quarter 7.10 Expired during Nil quarter 7.11 Debentures N/A (totals only) 7.12 Unsecured notes N/A (totals 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. 3 The information contained in this report has not been reviewed nor reported on by the company`s auditors. Date: 27 January 2012 (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. Date: 27/01/2012 10:13:01 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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