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Quarterly Report for the three months ended 30 June 2012
Resource Generation Limited
ACN 059 950 337
Quarterly Report
for the three months ended 30 June 2012
Resource Generation is developing the Boikarabelo coal mine in the Waterberg
region of South Africa where there are probable reserves of 744.8 million tonnes of
coal on 35% of the tenements under its control. Stage 1 of the mine development
targets saleable coal production of 6 million tonnes per annum.
PRESENT STATUS
- Banks are now undertaking detailed due diligence before offering terms for project
finance to develop the company’s massive open-cut coal mine.
- This follows Resource Generation signing a haulage contract with Transnet in June 2012
– overcoming its last hurdle before raising finance.
- The project’s sovereign risk has been minimised as a result of overcoming all major
regulatory hurdles faced by the company.
- Assuming agreement on project finance is reached, it will underwrite confidence in the
asset’s potential cash flow, which should increase the company’s enterprise value and
will determine the price at which equity is raised for the balance of the Stage 1
development cost and working capital.
- If funding is completed by the end of 2012, construction of the mine and its
infrastructure is expected to take 24 months, with Stage 1 saleable production (6 million
tonnes per annum) beginning at the start of 2015.
- Construction of Stage 2, planned to increase saleable production to more than 20 million
tonnes per annum, is expected to be funded from cash flow and a further equity capital
raising is not envisaged.
- The Waterberg region accounts for 40% of South Africa’s remaining coal resources and
Boikarabelo has probable reserves of 744.8 million tonnes* on 35% of its tenements –
which will make it a world-class mine by any measure.
- A contract to buy 139 million tonnes of coal over 38 years has already been signed with
India’s RPG Group, which owns 11.6% of Resource Generation after buying shares at
$0.575 in September 2010 and $0.82 in June 2011.
- A second contract has been signed with India’s Bhushan Steel to buy 500,000 tonnes per
annum for five years and a minimum of 500,000 tonnes per annum for a further 15 years.
- Negotiations have proceeded further with Eskom, South Africa’s power generation
company, to supply 3 million tonnes of thermal coal per annum to its Mpumalanga
power stations.
PROGRESS DURING THE QUARTER
Transnet Freight Rail contract signed
During the quarter, the company’s BEE subsidiary, Ledjadja Coal, signed a ten-year take-or-
pay rail haulage contract with Transnet Freight Rail (TFR) to haul up to 6 million tonnes of
coal per annum.
The main terms of the contract are as follows:
- The initial term is for 10 years with provision to extend for a further 10 years.
- The contract allows for 4 million tonnes in the first year, 5 million tonnes in the
second year and 6 million tonnes per annum thereafter. Should Eskom elect to
contract directly with TFR (which is Eskom’s intention) for the proposed domestic
purchases (currently under negotiation), the take-or-pay quantities in the contract will
reduce to export tonnage only.
- The contract specifies an indicative tariff for the current year. The actual tariff will be
determined annually by negotiation.
- The contract is conditional on Ledjadja Coal completing construction of the 36
kilometre rail link to the existing rail network.
- The contract is also conditional on TFR completing its processes to determine a fair,
proportional and equitable allocation of rail capacity to all interested parties from the
Waterberg. If these are not completed by 31 December 2012, this condition is
automatically waived and the above tonnage allocation becomes firm.
Water Use Licence received
An Integrated Water Use Licence governing all aspects of water use at the mine was received
during the quarter from the Department of Water Affairs. This enables the mine to conduct all
activities for stage 1 of planned production and to utilise its borefield.
Mining Right appeal dismissed
As previously advised, an appeal was lodged with the South African Department of Mineral
Resources (DMR) against Ledjadja Coal’s 30 year mining right. During the quarter, the
DMR wrote to Ledjadja Coal advising that the appeal against the mining right had been
dismissed and finalised.
Eskom update
Negotiations have proceeded further with Eskom on the contractual terms for the initial
supply of 3 million tonnes of thermal coal per annum.
Coal handling and preparation plant update
Detailed review and analysis of the two front-end engineering designs, which have been
completed by major providers of coal handling and preparation plants, continued during the
quarter. The reviews are nearing completion and the outcomes will enable the company to
determine the optimal solution from both a functional and cost perspective.
Power supply
Two comprehensive tenders were received for the design and construction of a 3x15MW
power station at the Boikarabelo mine site. The reviews of the tenders are nearing
completion, after which the company will be in a position to determine the best alternative
from both a functional and cost perspective.
Mine management team
The two key executives responsible for the development and operations of the Boikarabelo
mine both commenced in their roles during the quarter, being the General Manager
Boikarabelo Mine and General Manager Human Resources.
Continued strong interest from financiers for debt funding
All of the potential debt funders have confirmed that they are commencing their detailed due
diligence to provide project finance for the development of the Boikarabelo mine.
CAMEROON
There was no activity during the quarter on Resource Generation’s uranium tenements in
Cameroon.
CORPORATE
Cash reserves at 30 June 2012 were $12.1 million. This is expected to be sufficient to cover
cash requirements prior to the anticipated commencement of mine construction. The main
focus for the next quarter will be the negotiations for the project finance for the development
of the Boikarabelo mine.
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
* 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 30 June 2012
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 (41) (474)
(b) development (2,538) (6,978)
(c) production - -
(d) administration (172) (2,205)
1.3 Dividends received - -
1.4 Interest and other items of a similar nature received 205 1,029
1.5 Interest and other costs of finance paid (2) (10)
1.6 Income taxes paid - -
1.7 Other (provide details if material) - -
Net Operating Cash Flows (2,548) (8,638)
Cash flows related to investing activities
1.8 Payment for purchases of: (a) prospects - -
(b) equity investments - -
(c) other fixed assets (4,230) (4,437)
1.12 Proceeds from sale of: (a) prospects - -
(b) equity investment - -
(subsidiary) - 1,500
(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 26 490
acquisitions (refundable)
(4,204) (2,447)
Net investing cash flows
1.13 Total operating and investing cash flows (carried
(6,752) (11,085)
forward)
Current quarter Year to date (12 mths)
$A’000 $A’000
1.13 Total operating and investing cash flows (brought
(6,752) (11,085)
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) - (1,283)
Net financing cash flows - (1,283)
Net increase (decrease) in cash held (6,752) (12,368)
1.20 Cash at beginning of quarter/year to date 19,088 25,322
1.21 Exchange rate adjustments to item 1.20 (220) (838)
1.22 Cash at end of quarter 12,116 12,116
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 1.2 278
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 (7)
4.2 Development (737)
4.3 Production -
4.4 Administration (841)
Total (1,585)
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 $A’000
the related items in the accounts is as follows.
5.1 Cash on hand and at bank 32 19
5.2 Deposits at call 12,084 18,730
5.3 Bank overdraft - -
5.4 Other (Bank guarantees) - 340
Total: cash at end of quarter (item 1.22) 12,116 19,089
Changes in interests in mining tenements
Tenement reference Nature of interest Interest at Interest at
beginning of end of
quarter quarter
6.1 Interests in N/A N/A N/A N/A
mining tenements
relinquished,
reduced or lapsed
6.2 Interests in N/A N/A N/A N/A
mining tenements
acquired or
increased
Issued and quoted securities at end of current quarter
Description includes rate of interest and any redemption or conversion rights together with prices and dates.
Total number Number Issue price per Amount paid
quoted security up per security
($) ($)
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 262,895,652 262,895,652 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 Exercise price Expiry date
and conversion factor) 450,000 Nil $0.25 28/11/2012
1,875,000 Nil $0.50 31/12/2012
1,875,000 Nil $0.50 7/7/2013
250,000 Nil $0.50 17/3/2013
450,000 Nil $0.60 28/11/2012
250,000 Nil $0.70 17/3/2013
350,000 Nil $1.00 17/3/2013
350,000 Nil $1.50 17/3/2013
375,000 Nil $1.55 28/5/2013
375,000 Nil $1.85 28/5/2013
500,000 Nil $2.05 28/5/2013
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: 31 July 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: 31/07/2012 08:20:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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