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Shareholder Update
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”)
2 March 2017
ASX Announcement
Shareholder Update
Dear fellow shareholders
The Board met on 22 February 2017 to review progress on all material contracts and actions taken
in order to secure funding of the Boikarabelo Mine.
Project Funding
Since the Annual General Meeting on 23 November 2016, our key focus has been to secure
agreements on the major mining and logistics contracts. These contracts are among the conditions
precedent for the debt funding package, as well as being required to progress and complete the
construction of the Boikarabelo Mine. By reaching agreement with supply contractors we are able
to lock-in the project costs and de-risk an important element of a final debt funding agreement.
This process, in turn, has created additional options for debt funding.
While this process has taken longer than originally anticipated, significant progress has been made
with the Engineering, Procurement and Construction (EPC) and logistics contracts, reducing
capital costs and our borrowing requirement. The summary below illustrates the activities
undertaken since the AGM and current status. We are more confident than ever that this orderly
and deliberate process will result in an announcement of a full funding agreement for the project
based on a new target date of mid-2017.
The current status of each of the agreements and approvals required for financial closure is
summarised below.
Major items completed:
. Independent Technical Reports:
o Technical report completed in December 2016 (apart from commentary on material
contracts – see below)
o Environmental report completed in September 2016
o Marketing report completed in December 2016
o Legal due diligence report substantially completed with a small number of issues to be
resolved.
Resource Generation Australia (ACN 059 950 337)
c/o Level 1, 17 Station Road, Indooroopilly, QLD, 4068
GPO Box 126, Albion QLD 4010. Phone +27 (012) 345 1057 Fax +27 (012) 345 5314
Directors: Denis Gately (Chairman), Lulamile Xate (Deputy Chairman), Robert Croll, Dr. Konji Sebati,
Colin Gilligan, Leapeetswe Molotsane www.resgen.com.au
CEO: Rob Lowe
Company secretary: Mike Meintjes
The Board is satisfied that all of the above independent technical reports are supportive of the
project and debt funding requirement based on the revised mine execution strategy
announced on 1 June 2016.
. EPC contracts:
o The Coal Handling and Preparation Plant (CHPP) contract (term sheet announced on 6
May 2016): the wording of the design and construction contract with Sedgman was
completed in January 2017.
o CHPP Operations and Maintenance contract: the wording of the CHPP operations and
maintenance contract, also with Sedgman, was completed in January 2017.
Both contracts are currently being reviewed by the lenders.
. Logistics:
o Commercial terms relating to quantum, tariff and port destination (Richards Bay) have been
agreed with Transnet Freight Rail (TFR)
o The Transportation of Coal Agreement is substantially completed and is scheduled for
submission for review by the lenders in the near future
o Richards Bay Port Service Level Agreement is substantially completed and is scheduled
for submission for review by the lenders in the near future
o Process for the allocation of port capacity at Richards Bay Coal Terminal has been agreed
with TFR. Our expectation is for an allocation of 3.6 million tons per annum (Mtpa)
. Off-take Contracts:
o ICML 2Mtpa export off-take contract completed and signed (announced on 7 June 2011)
o Valu 1Mtpa export off-take contract completed and signed (announced on 10 July 2013)
o Noble 500,000 tpa export off-take contract completed and signed (announced on 2 April
2013)
o Noble domestic off-take contract completed and signed (note ESKOM/All Export below)
(announced on 4 June 2013)
Items not yet completed (and status):
. ESKOM/All Export
Our preferred lenders, particularly the PIC and IDC, have expressed a preference for our
domestic coal production to be sold to the state electricity generation utility ESKOM. We are
in the process of discussing a Coal Supply Agreement (CSA) with ESKOM. As an alternative,
we have developed a viable all export strategy which would be acceptable to PIC and IDC in
the event that ESKOM is unwilling to commit to a CSA within our required timeline. Either way,
we intend to conclude these arrangements by end April 2017.
. EPC Contracts
o Mining Contract (term sheet announced on 4 October 2016): the wording of the mining
contract is at an advanced stage and scheduled for completion by 31 March 2017
o Ancillary Works Package: the wording of the contract for the ancillary works package is at
an advanced stage and scheduled for completion by 31 March 2017.
. Rail Link
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Our initial discussions with TFR during 2016 were based on preliminary advice that TFR would
adopt and construct the rail link from mouth of mine to the main line siding at the
commencement of construction. TFR has recently advised that capital constraints prevent it
from adopting this approach but that, as an alternative, it is willing to partner with the Company
to raise the required funds of approximately R550 million to construct the link. Although this
was a set-back, we are pleased to be able to report that discussions are taking place with
potential funders, including South Africa Industrial Development Corporation (IDC) and
Development Bank of South Africa, who have both expressed strong interest and support. We
are hopeful to conclude this debt funding package by end April 2017.
. Credit Approvals
We believe that with the imminent conclusion of the EPC and logistics contracts, the lenders
will be in a position to obtain their requisite credit/investment committee approvals. Our hope
is that the lenders will have obtained credit approvals by end April 2017. We are seeking
proposed dates from the lenders for this process.
Taking all factors into account, and assuming no unforeseen delays, our expectation is to
conclude the debt funding arrangements by mid-2017.
Independent Power Producer (IPP)
In parallel to advancing the development of the Boikarabelo coal mine, the Company has continued
to plan to also operate as an Independent Power Producer, providing another option for the
domestic sale of coal. We have appointed external consultants, J Maynard and Waterborne
Capital, to assist us with the selection and appointment of the main EPC contractor and preparation
of a Joint Development Agreement. At the same time we are working to be ready to submit our
proposal when the Department of Energy opens the next submission window. This is expected to
be towards the end of 2017.
Working Capital Facility
The Company has reached an in-principle agreement for the extension of the Facility Agreement
of 3 March 2014. In this regard Noble Resources International Pte Ltd proposes to make available
further funds to the Company's subsidiary, Ledjadja Coal Pty Ltd, to fund the operations and
development of the Boikarabelo Mine until project funding is secured. The Company is in the
process of negotiating formal legal documents in order to be able to drawdown the additional funds.
A further announcement will be made once the legal documents in relation to this extension are
executed.
Other
The next scheduled board meeting is to be held on 26 April 2017. I intend to provide you with a
further report after that time.
Yours sincerely
Denis Gately
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Chairman
For and on behalf of the Board
About Resgen:
Resource Generation Limited (Resgen) is an emerging ASX and JSE-listed energy company,
currently developing the Boikarabelo Coal Mine in South Africa’s Waterberg region. The Waterberg
accounts for around 40% of the country’s currently known coal resources. The Coal Resources
and Reserves for the Boikarabelo Coal Mine, held through the operating subsidiary Ledjadja Coal,
were recently updated based upon a new mine plan and execution strategy. The Boikarabelo Coal
Resources total 995Mt and the Coal Reserves total 267Mt applying the JORC Code 2012 (ASX
Announcement 23 January 2017). Stage 1 of the mine development targets saleable coal
production of 6 million tonnes per annum. Ledjadja Coal is a Black Economic Empowerment
subsidiary (BEE) operating under South Africa’s Broad-based Black Economic Empowerment Act,
Section 9(5): Codes of Good Practice
ResGen’s primary shareholders are the Public Investment Corporation of South Africa (PIC), Noble
Group and Altius Investment Holdings.
For further information please contact:
Mike Meintjes, Company Secretary on mmeintjes@resgen.com.au or +61 413 706 143
Media enquiries:
Australia: Martin Debelle on + 61 282 340 102
South Africa: Charmane Russell/Thembisa Kotobe on +27 11 880 3924
JSE Sponsor: Deloitte & Touche Sponsor Services (Pty) Ltd
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