RESOURCE GENERATION LIMITED - Quarterly Report for the three months ended 31 March 2018

Release Date: 30/04/2018 08:50
Code(s): RSG
 
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Quarterly Report for the three months ended 31 March 2018

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”)


Quarterly Report for the three months ended 31 March 2018

 Resource Generation Limited (the “Company” or “Resgen”) is an emerging ASX and JSE-listed
 energy company, currently developing the Boikarabelo Coal Mine (“the 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 Coal Reserves for the Boikarabelo Coal Mine, held through the
 Company’s operating subsidiary Ledjadja Coal, were updated in 2016 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 - In accordance with
 Listing Rule 5.23.2 the Company confirms that it is not aware of any new information that would
 impact on the reported Coal Resources and Coal Reserves). Stage 1 of the mine development
 targets saleable coal production of 6 million tonnes per annum. Ledjadja Coal is a Black Economic
 Empowerment (BEE) subsidiary 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.

Project Funding
During the quarter there was continued progress in relation to securing credit approvals from
the proposed funding syndicate for the development of the mine (Funders) (ASX
Announcements: 8 March and 29 March 2018). The Company is working closely with all
Funders to ensure that requested information is available for the respective credit approval
processes.

The board meeting to consider a recommendation to Shareholders regarding the Funders’
credit approved term sheets has had to be delayed to 1 June 2018 due to a minor slippage in
one of the approval processes and to allow time to address feedback from these approvals.
The Company will keep the market updated on progress, in accordance with its continuous
disclosure requirements, in the lead up to this meeting.

Following the end of the quarter (ASX Announcement: 16 April 2018), the Company advised
that the Industrial Development Corporation of South Africa Limited (IDC) is the first of these
Funders to approve the proposed funding and a Bilateral Senior Loan Facility Agreement
(Facility Agreement) has been executed with the Company’s subsidiary, Ledjadja Coal (Pty)
Ltd, to confirm the IDC’s commitment to the Project.

The Facility Agreement, whilst binding on the parties, is dependent on a number of Conditions
Precedent, including but not limited to:

   •   Resgen Board and Shareholder approval of the funding Term Sheets with the Funders;

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                                                                        Resource Generation Limited
                                                                   Quarterly Report to 31 March 2018

   •   Completion of a Common Terms Agreement (CTA) with the other two Funders, the
       finalised Facility Finance Documents becoming unconditional and all required
       securities being registered;
   •   All lower ranking components of the proposed funding package having been drawn
       down;
   •   The Project becoming fully funded including arranging separate rail link financing; and
   •   No material adverse changes arising (to be specified in the CTA).

In essence, the Facility Agreement serves to bind the parties to advance or draw the senior
debt funds for the Project subject to completion of, amongst others, the Conditions Precedent
listed above.

Key terms in the Facility Agreement have been limited to:

   •   Specifying the quantum of IDC’s commitment to the senior debt component of the
       proposed funding package which is R540m;
   •   Specifying an interest rate which is linked to JIBAR (Johannesburg Interbank Agreed
       Rate) with a margin of 6% during construction and 5% thereafter;
   •   Specifying a Facility Raising Fee, due at the time of Financial Close, of 1.5% and a
       cancellation fee of 1% applicable to any undrawn amounts under the Facility;
   •   A long stop date for completion of all Conditions Precedent of 28 February 2020 which
       would be an automatic termination of the Agreement unless agreed otherwise; and
   •   All further terms and conditions are referenced to a CTA to be negotiated when, and
       if, the remaining Funders secure credit approvals and the Term Sheets are approved
       by all parties.

Working Capital Facility

The Company has agreed a further extension of the Facility Agreement of 3 March 2014
(Facility), under which Noble Resources International Pte Ltd will make available additional
funds of up to US$2.5m to the Company's subsidiary, Ledjadja Coal (Pty) Ltd (LCL) to fund
operations whilst project funding is secured. The total Facility made available to the Company
is now US$34.7m.

The additional funds are to be made available on the same terms as the existing Facility and
can be drawn in monthly tranches over the period to 31 July 2018.

Key terms associated with the extension of the Facility include:

   •   The additional funds together with the existing fully drawn Facility of US$32.2m (see
       ASX Announcements: 14 March 2017 and 7 December 2017) are unsecured and
       subject to a parent company guarantee of LCL’s obligations under the agreement;
   •   The funding to be provided in monthly instalments over the period May to July 2018;
   •   Interest accrues at 10.75% pa and can be capitalised on a six-monthly basis unless the
       borrower elects otherwise to pay such interest; and
   •   The initial Facility of US$20m is now repayable in instalments commencing from 1
       August 2018 (previously 1 April 2018) with a termination date of 31 December 2024,
       however the additional funds made available under the extension of the Facility


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                                                                     Resource Generation Limited
                                                                Quarterly Report to 31 March 2018

       (US$14.7m) are repayable from the proceeds of the first drawdown of any facility
       agreement for any project financing for the Project.




CEO Arrangements

During the contract extension discussions during the second half of last year the then CEO,
Rob Lowe, indicated a desire to stand down from the role shortly after Financial Close and to
then support the business transition to the mine development phase. The Board, in
consultation with the proposed Funders, decided to commence this transition process early
with the Board’s Nomination Committee being tasked to conduct a market search using an
industry qualified recruitment agency in South Africa. This process is currently in progress.
Effective 8 March 2018, Rob Lowe stood down as CEO and assumed the role of Advisor -
Project Funding focusing exclusively on achievement of Financial Close and first drawdown of
funds. Rob will remain with the Company on a full-time basis assisting with project start-up
activities until completion of his contract on 31 December 2018. Leapeetswe (Papi)
Molotsane, a Non-Executive Director, was appointed as Interim Managing Director and CEO
on a month to month basis through to Financial Close, or until the appointment of a
replacement CEO. Papi had already been assisting the project funding workstreams and has
the full support of Rob Lowe in pursuing Financial Close.

Capital Structure and Cash Position
The Company’s summarised capital structure at 31 March 2018 is as follows:

Issued fully paid ordinary shares:          581,380,338
Performance share rights:                   5,750,000
Cash at bank:                               $3.5 million

Shareholders and potential investors should also review the Company’s 2017 Annual Report,
the audited Financial Report for the year ending 30 June 2017 and the Interim Financial Report
for the six months ending 31 December 2017 to fully appreciate the Company’s financial
position.

Mining Tenements
The coal mining rights and exploration tenements held at the end of the quarter were as
follows:

   .   MPT 169 MR (74%)
   .   PR678/2007 (74%)
   .   PR720/2007 (74%)
The Company has no interest in farm-in or farm-out agreements.


                                         Page 3 of 11
                                                                       Resource Generation Limited
                                                                  Quarterly Report to 31 March 2018

The Mining Right Application for Waterberg No. 1 was lodged at the end of 2015. Waterberg
No.1 encompasses the farm Koert Louw Zyn Pan (PR678/2007) and is adjacent to the
Boikarabelo Coal Mine.
The Company is in the process of relinquishing PR720/2007, over the properties Lisbon and
Zoetfontein, as these are distant from the mine and contain minimal resources that have not
been included in the declared JORC resource.

On behalf of the Board of Directors
Yours faithfully
Mike Meintjes
Company Secretary
RESOURCE GENERATION LIMITED
Corporate information
Directors
Lulamile Xate                    Non-Executive Chairman
Rob Croll                        Independent Non-Executive Director
Manish Dahiya                    Non-Executive Director
Colin Gilligan                   Independent Non-Executive Director
Leapeetswe Molotsane             Independent Non-Executive Director
Dr Konji Sebati                  Independent Non-Executive Director
Peter Watson                     Independent Non-Executive Director
Greg Hunter                      Alternate Non-Executive Director for M. Dahiya
Company Secretary
Mike Meintjes
Registered office
Level 1, 17 Station Road
Indooroopilly, QLD 4068, Australia
Telephone: +27 11 010 6310
Facsimile:      +27 86 539 3792
Website:        www.resgen.com.au

Mailing address
                  South Africa                                     Australia
 PO Box 5384                                       PO Box 126
 Rietvalleirand 0174                               Albion
 Gauteng, South Africa                             QLD 4010, Australia

Company contacts
Lulamile Xate                    +27 11 010 6310
Leapeetswe Molotsane             +27 11 010 6310

Media contacts


                                           Page 4 of 11
                                                                    Resource Generation Limited
                                                               Quarterly Report to 31 March 2018

                South Africa                                      Australia
Russell and Associates (Marion Brower)          Citadel MAGNUS (James Strong)
t: +27 11 880 3924                              t: +61 2 8234 0100
42 Glenhove Rd, Johannesburg 2196               Level 15, 61 York Street, Sydney
Gauteng, South Africa                           NSW 2000, Australia




                                         Page 5 of 11
                                                                                   Resource Generation Limited
                                                                              Quarterly Report to 31 March 2018


Competent Persons’ Statements
The information contained in this Quarterly Report which relates to estimates of the Coal
Resources and Coal Reserves for the Boikarabelo Coal Mine is based on and accurately reflects
reports prepared by Competent Persons named beside the respective information in the table
below. Mr Riaan Joubert is the Principal Geologist employed by Ledjadja Coal. Mr Ben Bruwer
is a Principal Consultant with VBKom (Pty) Ltd (VBKOM).
Summary of Competent Persons responsible for the Coal Resources and Coal Reserves for the
Boikarabelo Coal Mine

Competent Person Area of Competency Professional                        Year of       Membership Number
                                      Society                         Registration
Riaan Joubert            Coal Resources             SACNASP*             2002              400040/02
Ben Bruwer               Coal Reserves              SAIMM**              1994               701068

*SACNASP - South African Council for Natural Scientific Professions

**SAIMM - Southern African Institute of Mining and Metallurgy

The above-named Competent Persons both consent to the inclusion of material in the form
and context in which it appears in this Quarterly Report. Both individuals are members of a
Recognised Professional Organisation in terms of the JORC Code 2012, and both have a
minimum of five years’ relevant experience in relation to the mineralisation and type of
deposit being reported on by them to qualify as Competent Persons as defined in the JORC
Code 2012.
Neither Mr Bruwer, nor VBKOM, has a material interest or entitlement, direct or indirect, in
the securities of Resource Generation Limited. Mr Joubert holds no shares in Resource
Generation Limited.




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                                                                          Resource Generation Limited
                                                                     Quarterly Report to 31 March 2018


                                                                                               Rule 5.5
                                          Appendix 5B
      Mining exploration entity and oil and gas exploration entity
                           quarterly report
Name of entity
Resource Generation Limited

ABN                                                  Quarter ended (“current quarter”)
91 059 950 337                                       31 March 2018


                                                          Current quarter          Year to date
Consolidated statement of cash flows
                                                                                    (9 months)
                                                              $A’000                  $A’000
1.      Cash flows from operating activities
1.1     Receipts from customers                                              -                       -
1.2     Payments for
        (a) exploration & evaluation                                         -                       -
        (b) development                                                (701)                  (4,269)
        (c) production                                                       -                       -
        (d) staff costs                                                (876)                  (2,751)
        (e) administration and corporate costs                         (368)                  (1,365)
1.3     Dividends received (see note 3)                                      -                       -
1.4     Interest received                                                   49                    175
1.5     Interest and other costs of finance paid                             -                       -
1.6     Income taxes (paid)/refunded                                         -                    (1)
1.7     Research and development refunds                                     -                       -
1.8     Other                                                                -                       -
1.9     Net cash from / (used in) operating                          (1,896)                  (8,211)
        activities


2.      Cash flows from investing activities
2.1     Payments to acquire:
        (a) property, plant and equipment                                    -                    (1)
        (b) tenements (see item 10)                                          -                       -
        (c) investments                                                      -                       -

                                           Page 7 of 11
                                                                           Resource Generation Limited
                                                                      Quarterly Report to 31 March 2018

                                                            Current quarter         Year to date
Consolidated statement of cash flows
                                                                                     (9 months)
                                                                $A’000                 $A’000
       (d) other non-current assets                                            -                     -
2.2    Proceeds from the disposal of:
       (a) property, plant and equipment                                       -                     -
       (b) tenements (see item 10)                                             -                     -
       (c) investments                                                         -                     -
       (d) other non-current assets                                            -                     -
2.3    Cash flows from loans to other entities                                 -                     -
2.4    Dividends received (see note 3)                                         -                     -
2.5    Other (provide details if material)                                     -                     -
2.6    Net cash from / (used in) investing                                     -                   (1)
       activities


3.     Cash flows from financing activities
3.1    Proceeds from issues of shares                                          -                     -
3.2    Proceeds from issue of convertible notes                                -                     -
3.3    Proceeds from exercise of share options                                 -                     -
3.4    Transaction costs related to issues of                                  -                     -
       shares, convertible notes or options
3.5    Proceeds from borrowings                                           3,865                 8,675
3.6    Repayment of borrowings                                            (631)                (1,931)
3.7    Transaction costs related to loans and                                  -                     -
       borrowings
3.8    Dividends paid                                                          -                     -
3.9    Other (provide details if material)                                     -                     -
3.10   Net cash from / (used in) financing                                3,234                 6,744
       activities


4.     Net increase / (decrease) in cash and
       cash equivalents for the period
4.1    Cash and cash equivalents at beginning of                          1,830                 4,682
       period
4.2    Net cash from / (used in) operating                               (1,896)               (8,211)
       activities (item 1.9 above)
4.3    Net cash from / (used in) investing                                     -                   (1)
       activities (item 2.6 above)


                                             Page 8 of 11
                                                                           Resource Generation Limited
                                                                      Quarterly Report to 31 March 2018

                                                            Current quarter          Year to date
Consolidated statement of cash flows
                                                                                      (9 months)
                                                                $A’000                  $A’000
4.4    Net cash from / (used in) financing                               3,234                  6,744
       activities (item 3.10 above)
4.5    Effect of movement in exchange rates on                            288                       242
       cash held
4.6    Cash and cash equivalents at end of                               3,456                  3,456
       period


5.     Reconciliation of cash and cash                      Current quarter        Previous quarter
       equivalents                                              $A’000                  $A’000
       at the end of the quarter (as shown in the
       consolidated statement of cash flows) to
       the related items in the accounts
5.1    Bank balances                                                          21                    121
5.2    Call deposits                                                     3,435                  1,709
5.3    Bank overdrafts                                                         -                      -
5.4    Other (contract retentions)                                             -                      -
5.5    Cash and cash equivalents at end of                               3,456                  1,830
       quarter (should equal item 4.6 above)


6.     Payments to directors of the entity and their associates                    Current quarter
                                                                                       $A'000
6.1    Aggregate amount of payments to these parties included in                                    141
       item 1.2
6.2    Aggregate amount of cash flow from loans to these parties                                      -
       included in item 2.3
6.3    Include below any explanation necessary to understand the transactions included in
       items 6.1 and 6.2
Directors’ remuneration and consulting fees




                                             Page 9 of 11
                                                                               Resource Generation Limited
                                                                          Quarterly Report to 31 March 2018

7.      Payments to related entities of the entity and their                           Current quarter
        associates                                                                         $A'000

7.1     Aggregate amount of payments to these parties included in                                        9
        item 1.2
7.2     Aggregate amount of cash flow from loans to these parties                                        -
        included in item 2.3
7.3     Include below any explanation necessary to understand the transactions included in
        items 7.1 and 7.2
Office rental and associated services


8.      Financing facilities available                       Total facility amount    Amount drawn at
        Add notes as necessary for an understanding of the      at quarter end          quarter end
        position                                                    $A’000                $A’000
8.1     Loan facilities
             ?   Unsecured loan (note 1)                                   45,195                  41,939
             ?   Unsecured loan (note 2)                                     3,420                   3,420

8.2     Credit standby arrangements                                              -                       -

8.3     Other (please specify)                                                   -                       -

8.4     Include below a description of each facility above, including the lender, interest rate and
        whether it is secured or unsecured. If any additional facilities have been entered into or are
        proposed to be entered into after quarter end, include details of those facilities as well.
Note 1 The Company has a Facility Agreement under which Noble Resources International Pte Ltd
has agreed to make available funds of up to US$34.7 million to the Company's subsidiary, Ledjadja
Coal (Pty) Ltd, to fund the operations and development of the Boikarabelo Coal Mine whilst funding
to complete the project is secured. US$32.2 million has been drawn down as at 31 March 2018. The
loan is repayable in quarterly instalments over 78 months commencing from 1 August 2018 and has
an annual interest rate of 10.75%.
Note 2 EHL Energy (Pty) Ltd constructed the electricity sub-station at the Boikarabelo Coal Mine
which connects the mine to the grid. The construction was subject to a deferred payment plan with
interest payable at the ABSA Bank prime lending rate plus 3%. The loan is unsecured and amounted
to ZAR82.5 million. There are 6 quarterly instalments remaining to be paid as at 31 March 2018.


9.      Estimated cash outflows for next quarter                                     $A’000
9.1     Exploration and evaluation                                                                       -

9.2     Development                                                                                (1,812)

9.3     Production                                                                                       -

9.4     Staff costs                                                                                (1,289)

9.5     Administration and corporate costs                                                           (546)

9.6     Other – repayment of borrowings                                                              (682)

9.7     Total estimated cash outflows                                                              (4,329)




                                                 Page 10 of 11
                                                                                 Resource Generation Limited
                                                                            Quarterly Report to 31 March 2018

    10.       Changes in               Tenement      Nature of interest             Interest     Interest
              tenements                reference                                    at           at end of
              (items 2.1(b) and        and                                          beginning    quarter
              2.2(b) above)            location                                     of quarter

    10.1      Interests in mining            -                     -                     -            -
              tenements and
              petroleum tenements
              lapsed, relinquished
              or reduced
    10.2      Interests in mining            -                     -                     -            -
              tenements and
              petroleum tenements
              acquired or increased


Compliance statement
1          This statement has been prepared in accordance with accounting standards and policies which
           comply with Listing Rule 19.11A.
2          This statement gives a true and fair view of the matters disclosed.


Sign here:                                            Date: 30 April 2018
                        (Company secretary)


Print name:          MICHAEL MEINTJES
JSE Sponsor: Deloitte & Touche Sponsor Services (Pty) Ltd


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 that wishes to
           disclose additional information is encouraged to do so, in a note or notes included in or attached
           to this report.
2.         If this quarterly report has been prepared in accordance with Australian Accounting Standards,
           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. If this quarterly report has been
           prepared in accordance with other accounting standards agreed by ASX pursuant to Listing
           Rule 19.11A, the corresponding equivalent standards apply to this report.
3.         Dividends received may be classified either as cash flows from operating activities or cash flows
           from investing activities, depending on the accounting policy of the entity.




                                                 Page 11 of 11

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