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Quarterly Report for the three months ended 30 September 2012
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
("Resgen" or the “Company”)
Quarterly Report
for the three months ended 30 September 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
- A financing syndicate has been mandated to provide approximately USD400 million by
way of a project finance facility for the development of the Boikarabelo mine. The
syndicate is now progressing towards formal credit approvals for the facility.
- Assuming project finance is achieved, the company will progress to an equity raising for
the balance of the funds needed to develop the mine.
- Key achievements over the past four years have been:
- Obtaining a 30 year mining right.
- Obtaining life-of-mine development consent for construction of the mine and the rail
link to the existing network.
- Obtaining an integrated water use licence, that includes utilising borewater from the
company’s properties, which will be sufficient for stage 1 of operations.
- Sufficient power supply arranged for stage 1 of operations.
- Acquisition of all land required for the mine and for the rail link, including some
servitude arrangements.
- Signing a long-term haulage contract with Transnet.
- Two significant export contracts to supply thermal coal to Indian customers.
- A fully compliant BEE structure.
- All major regulatory hurdles have been overcome.
- If funding is completed by the end of 2012, construction of the mine, its infrastructure
and the rail link 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, can be funded from cash flow.
Resource Generation Limited
Quarterly Report to 30 September 2012
PROGRESS DURING THE QUARTER
Financing Syndicate Mandated
Since the end of the quarter, the company’s BEE subsidiary, Ledjadja Coal, has awarded a
mandate to six South African and global banks and other financiers to provide project debt
finance for the construction of the Boikarabelo mine. The financiers are:
- Absa Capital, a division of Absa Limited, a member of the Barclays Bank Group;
- Caterpillar Financial SARL;
- FirstRand Bank Limited, acting through its Rand Merchant Bank division;
- Hong Kong & Shanghai Banking Corporation (HSBC);
- Nedbank Capital, a division of Nedbank Limited; and
- Standard Chartered Bank.
This mandate followed an extensive tender process and negotiation of key commercial terms.
Subject to obtaining final credit approval and completing finance and security documents, the
financiers will provide approximately 60% of the total funds required for mine construction.
Due diligence reports have been prepared by independent experts engaged on behalf of the
financiers. The experts are Bowman Gilfillan, Coffey Mining, Jardine Lloyd Thompson,
KPMG and Wood McKenzie and their reports are under review by the financiers.
The financiers are now progressing towards formal credit approvals for the facility and these
are targeted for receipt in early November. Financial close and first funding are expected to
be subject to conditions precedent typical of project finance facilities, including raising
sufficient equity capital to fully fund the balance of the expected capital expenditure for mine
development.
The proposed terms of the facility include:
- A term of 9 years, including the construction period.
- A senior debt facility of around USD400 million plus associated facilities (including a
working capital facility).
- The senior debt facility will be provided via a mix of USD and ZAR loans and is on
normal commercial terms.
Based on the current timetable, once formal credit approval is obtained Resource Generation
will proceed with an equity capital raising. It is hoped that this can be completed by mid-
December 2012, which would enable development of the Boikarabelo mine to proceed in
January 2013.
Assuming credit approval for the debt funding, supported by the results of the due diligence,
the company is confident that the mine’s projected cash flow potential and value will be
recognised in the price of the proposed equity raising. However, the terms of the equity
raising and participants in the raising are still to be determined.
Page 2 of 9
Resource Generation Limited
Quarterly Report to 30 September 2012
Reduction in capital expenditure
The company was able to reduce the estimated capital cost of the Boikarabelo coal mine
during the quarter by USD120 million to USD630 million (real). This reflects flexibility
provided by Eskom’s commitment to supply sufficient power for stage 1 of the mine’s
operation as early as 2014, after the first generating unit at its new Medupi power station is in
commercial operation. This will meet the company’s target of beginning coal production
early in 2015.
The cost of Boikarabelo’s planned 45MW power station, for which tenders have been
received, has been removed from the capital expenditure estimate for stage 1 of
Boikarabelo’s operations. A decision on whether to proceed with this will now not take place
until 2013.
Potential resource increase
During the quarter, Exxaro Resources exercised its put option under which it could require
Ledjadja Coal to acquire further coal tenements from Exxaro. The exercise of the put option
is subject to approval by the Department of Mineral Resources (DMR) under Section 11 of
the Mineral and Petroleum Resources Development Act, 2002.
The coal tenements are contiguous to the company’s existing tenements, including Swelpan
and Kleinpan which land is owned by Resource Generation. The consideration payable is not
material. The tenements can be added to Boikarabelo’s existing mining rights to secure their
tenure, subject to DMR approval. No amounts are due to be paid until the DMR has
approved the transfer to Ledjadja, Resource Generation’s BEE subsidiary. From prior
experience with Section 11 approvals, this process is not likely to be completed before mid-
2013.
Should the DMR approve the transfer, the Boikarabelo mine will increase its total resources
by 31%*. The following table reflects resources and reserves, excluding 50% for shale
content, after the transfer.
Measured Indicated Inferred Total Probable
Resource Resource Resource Resource Reserve
(Mt) (Mt) (Mt) (Mt) (Mt)
1,090.5 1,526.2 1,479.6 4,096.3 744.8
Eskom update
Negotiations with Eskom on the contractual terms for the initial supply of 3 million tonnes of
thermal coal per annum are now at a mature stage.
Coal handling and preparation plant update
A detailed review and analysis of the two front-end engineering designs, completed by major
providers of coal handling and preparation plants, were completed during the quarter. The
optimal solution has been determined from both a functional and cost perspective and is
being incorporated into the mine’s design.
CAMEROON
There was no activity during the quarter on Resource Generation’s uranium tenements in
Cameroon.
Page 3 of 9
Resource Generation Limited
Quarterly Report to 30 September 2012
CORPORATE
Cash reserves at 30 September 2012 were $8.9 million.
The main focus for the next quarter will be finalising the project finance for the development
of the Boikarabelo mine and the subsequent equity raising to meet the required total
expenditure required to develop the 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.
Page 4 of 9
Resource Generation Limited
Quarterly Report to 30 September 2012
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 September 2012
Consolidated statement of cash flows
Current quarter Year to date (3 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 (23) (23)
(b) development (2,318) (2,318)
(c) production - -
(d) administration (201) (201)
1.3 Dividends received - -
1.4 Interest and other items of a similar nature received 168 168
1.5 Interest and other costs of finance paid (3) (3)
1.6 Income taxes paid - -
1.7 Other (provide details if material) - -
Net Operating Cash Flows (2,377) (2,377)
Cash flows related to investing activities
1.8 Payment for purchases of: (a) prospects - -
(b) equity investments - -
(c) other fixed assets (281) (281)
1.12 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- Government charges in relation to land 601 601
acquisitions and development expenditure
(refundable)
320 320
Net investing cash flows
1.13 Total operating and investing cash flows (carried
(2,057) (2,057)
forward)
Page 5 of 9
Resource Generation Limited
Quarterly Report to 30 September 2012
Current quarter Year to date (12 mths)
$A’000 $A’000
1.13 Total operating and investing cash flows (brought
(2,057) (2,057)
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) (1,161) (1,161)
Net financing cash flows (1,161) (1,161)
Net increase (decrease) in cash held (3,218) (3,218)
1.20 Cash at beginning of quarter/year to date 12,116 12,116
1.21 Exchange rate adjustments to item 1.20 (43) (43)
1.22 Cash at end of quarter 8,855 8,855
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 1.2 271
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 - -
Page 6 of 9
Resource Generation Limited
Quarterly Report to 30 September 2012
Estimated cash outflows for next quarter
$A’000
4.1 Exploration and evaluation (39)
4.2 Development (3,860)
4.3 Production -
4.4 Administration (845)
Total (4,744)
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 $A’000
the related items in the accounts is as follows.
5.1 Cash on hand and at bank 148 148
5.2 Deposits at call 8,707 8,707
5.3 Bank overdraft - -
5.4 Other (Bank guarantees) - -
Total: cash at end of quarter (item 1.22) 8,855 8,855
Changes in interests in mining tenements
Tenement reference Nature of interest Interest at Interest at
beginning of end of
quarter quarter
6.1 Interests in N/A N/A N/A N/A
mining tenements
relinquished,
reduced or lapsed
6.2 Interests in N/A N/A N/A N/A
mining tenements
acquired or
increased
Page 7 of 9
Resource Generation Limited
Quarterly Report to 30 September 2012
Issued and quoted securities at end of current quarter
Description includes rate of interest and any redemption or conversion rights together with prices and dates.
Total number Number Issue price per Amount paid
quoted security up per security
($) ($)
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)
Page 8 of 9
Resource Generation Limited
Quarterly Report to 30 September 2012
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: Signed Date: 16 October 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.
== == == == ==
Page 9 of 9
Sydney
17 October 2012
JSE Sponsor:
Macquarie First South Capital (Proprietary) Limited
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