Wrap Text
RSG - Resource Generation Limited - Transcript of webcast by Paul Jury Managing
Director Resource Generation
Resource Generation Limited
Registration number ACN 059 950 337
(Incorporated and registered in Australia)
Share code on the JSE Limited: RSG
Share code on the Australian Stock Exchange: RES
ISIN Code: AU000000RES1
("Resgen" or "the Company")
BRR MEDIA
TRANSCRIPT OF WEBCAST BY PAUL JURY MANAGING DIRECTOR
RESOURCE GENERATION
WEDNESDAY, 9 MAY 2012
Q1 Today on BRR I`m joined by Mr Paul Jury, the Managing Director of Resource
Generation. The Company has released some significant updates for its
Boikarabelo Project and Paul is going to talk me through a few points now.
Paul, a couple of questions. Can I get you to start by talking through the
significance of the water licence approval and the dismissal of the mining
right appeal for the Project' With these milestones now completed, does
this open the development path for the Project' Could I ask you to provide
an update on the Transnet contract discussions and, finally, what
activities are you now focused on to progress the Project'
A1 Thanks very much. We`ve just released to the market a presentation update
on the Boikarabelo Project and where we stand with its development path
and, I guess, to deal with the questions and probably to cover, the first
part of that presentation would hopefully answer most of those questions as
well. So in terms of the presentation itself, I`ll talk to slides 3 to 7
of the presentation, just to give a better feel for where we`re at.
The significance of receiving the water use licence and the dismissal of
the appeal against the mining right was that it effectively cleared the
path for all our regulatory approvals for the Project to proceed. And
that`s a very pleasing step, and it`s certainly a significant step,
especially given the size and the nature of the quality of this Project and
its development for both the Limpopo Region and for South Africa itself.
However, dealing with slide number 3 of our presentation - the major bridge
that we always had to cross was securing a contract with Transnet. That`s
certainly a significant bridge that we`re still walking across, but we are
at a very mature stage in that process after some two years of
negotiations, and we hope that that can come to a successful conclusion
very soon.
On that basis, I guess, the mine construction timeline would follow a path
of us having first to go to our project finance banks, get them to
complete a detailed due diligence and, having secured the project funding,
to cap up our requirements with equity, then get into the mine construction
phase. So that funding stage we would see as a four to five month process,
and then the mine construction phase would be another 24 months. So the
timeline to the first production from the mine would probably follow that
path. So, really, the starting gun for that is to complete the contract
with Transnet.
On that basis I`ll move to slide number 4. In relation to our negotiations
with Transnet, one of the major obstacles we`ve had in our discussions with
them has been their insistence that they first complete feasibility studies
associated with allocations from the Waterberg. They would not make a firm
commitment until those studies were completed. For some time, I guess, we
have been bashing our heads up against each other in respect to a firm
allocation. What we have done is reached a compromise with them. We,
ourselves, do not have a concern with the capacity available in the system,
particularly in respect to our 6 million tonnes. I should add that we are
very firm, we are very committed to signing a take or pay contract for
that. In doing so, I guess, we have asked Transnet to put a deadline with
respect to their own feasibilities or their own studies, and we`ve agreed
that, in the case that they haven`t completed their studies by the end of
December this year, that our commitment would become firm.
On that basis we believe that we`d be able to take the contract to our
banks. Firstly, however, we have to complete tariff negotiations and we
just expect that that tariff should be fair and equitable, basically
associated with charges that they made to other Waterberg operators.
Hopefully in the very near future we should see some conclusions to these
negotiations, in which case we could then move on.
That being the case we could move to slide number 5 where we would be
talking basically to our banks straight away after signing the contract,
getting them into detailed due diligence. Total project capex is still
about $US750 million and our plan there is to first secure our project
financing, which would probably cover around about 50 per cent of that
capital requirement based on the indicative offers that we have received
from the project banks. Once we`ve got that project financing agreement at
least in some form of secure form, then we`d be able to move to the equity
markets to top up our capital expenditure requirement through an equity
raising. That`s the process that would probably take four to five months
after we`ve signed the Transnet contract.
Just to move on about what we believe is the strengths of the Project, On
to slide 6 - what are the attributes that would support a successful
fundraising, particularly from debt and equity' Clearly, we have a very
large coal deposit, very shallow overburden. It`s a very low-cost mining
operation. Already there`s a 745 million tonne bankable reserve defined
within that. It only represents 35 per cent of the total resource, so it`s
a significant deposit and, with a long-life mine, a very low-cost
operation.
In conjunction with that, we`ve secured some long-term export thermal coal
contracts. There is still strong long-term export thermal coal demand,
particularly out of India, and we have two long-term contracts with Indian
companies there, one for 38 years and another one for 20 years. If we were
to proceed with project funding we would be able to secure further
contracts, but we don`t want to over-commit ourselves at this early stage
of the Project.
Now, they`re really the two strong attributes that are supporting, the
financiers` interest in the Project. To some extent there is also a
middlings production stream. There is solid domestic demand from Eskom
particularly, and that would also provide upside to our cash flows. But
the critical elements are the strong export thermal coal demand and,
obviously, the low-cost mining opportunity that presents itself with our
deposit.
I`d like to add, by moving to slide 7, that one of the major issues
associated with our company and our Project has been this perception of
sovereign risk, investing in South Africa. I`d have to say that I don`t
particularly see that myself. Our experience over the last few years has
been driven by the fact that we focused on becoming a very effective BEE in
ourselves, within the Company, and our BEE partners are very much a
singular part of our whole management structure. So we operate as one and,
I guess, the effectiveness of that has been that we`ve been able to move
through and facilitate all the necessary approvals through the various
departments and bureaucracies that are required, obviously, the three big
ticket items being the mining right, receiving our development consent,
which is a life of mine development consent which enables not only the
construction of the mine but also the rail link, and, most recently, the
issuing of the water use licence. There will be other processes that we
have to go through, but I have to say it certainly signifies an effective
BEE when the formula is approached in the right sort of form.
So that wraps up the part of the presentation I`d like to talk about. In
closing though, in terms of confidence, Transnet have expressed a strong
desire to open up the Waterberg. It is definitely one of the future areas
for development within South Africa, and there`s been a big commitment by
them as well as the government. Signing a take or pay contract with us is
clearly low-hanging fruit for them and it should be something that they
ought to grasp because it would not only underwrite our Project but also
underwrite one of the first developments of this major area for the
country.
I would encourage people to walk through the remainder of the presentation
off our website. We do provide in there some updated material on the
status of the mine and a lot of the detail that we`ve been going through in
order to make sure that it is truly a deliverable Project. Thank you very
much.
RECORDING CONCLUDED
Sydney, Australia
9 May 2012
Contacts
Paul Jury, Managing Director on (02) 9376 9000 or
Steve Matthews, Company Secretary on (02) 9376 9000
Media enquiries
Anthony Tregoning (02) 8264 1000
JSE Sponsor: Deloitte & Touche Sponsor Services (Pty) Limited
Date: 09/05/2012 08:58:01 Supplied by www.sharenet.co.za
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