RESOURCE GENERATION LIMITED - Quarterly Report for the three months ended 30 June 2018

Release Date: 30/07/2018 08:30
Code(s): RSG
 
Wrap Text
Quarterly Report for the three months ended 30 June 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 30 June 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 coalfield. The Waterberg coalfield 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
Progress during the quarter
The Company announced the execution of a Bilateral Senior Loan Facility Agreement (ASX
Announcement: 16 April 2018) between the Industrial Development Corporation of South
Africa Limited (IDC) and its subsidiary Ledjadja Coal (Pty) Ltd. The IDC is the first party of the
proposed mine development funding syndicate (Syndicate) to secure credit committee
approval.

In the Quarterly Activities Report released on 30 April 2018 and subsequent market updates
on 10 May and 4 June 2018, the Company noted slippage in the credit approval process for
one of the remaining two Syndicate members and a delay to the proposed board meeting for
considering finalised credit approved term sheets from the Syndicate. Whilst both of these
parties have confirmed ongoing commitment to funding of the Boikarabelo Project, one of
these parties requested further information before proceeding with their process. The
additional information requested revolved around:

   (i)     mitigation of counterparty credit risk exposures during the period that Noble
           Group Limited (Noble) finalises its restructure plans; and
   (ii)    the specific plans to secure working capital for the ramp-up of the mine.

In late June 2018, the Company provided a written response to the concerns raised by the
Lender and has received confirmation from the Lender’s Deal Team that the responses to
matters raised were acceptable and would enable completion of the credit approval
submission.
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                                                                       Resource Generation Limited
                                                                    Quarterly Report to 30 June 2018




Subsequent to quarter end

At a meeting held on 27 July 2018 the Board received an update from the Lender’s Deal Team.
It is understood that the credit submission is complete and has the support of the Lender’s
Deal Team, although it is yet to be tabled for credit approval. The Company has been informed
that the delay now relates to a broad-based internal review of the Lender organisation’s ESG
investment criteria.

The Board is concerned about this unexpected delay and has agreed to intensify and facilitate
engagement with this Lender over the coming fortnight given the advanced status of the
submission. In addition, a contingency plan will be triggered given the importance of reaching
financial close without further delay. At this time the Board believes that it is not prudent to
set a timetable for final credit approvals and will keep the market informed in accordance
with its continuous disclosure obligations.

Noble has agreed in principle to extend the working capital facility through to October 2018
as well as extending the due date for commencing repayment – see further detail below.

Rail Link Funding

The Company has been able to identify a number of parties interested in funding the required
rail link for the Project. Due diligence activities and discussions continue with the objective of
securing the offer of credit approved term sheets.

Uncontracted Tonnage Offtake Agreement

As announced on 14 March 2017, as part of the extension of the Facility Agreement dated 3
March 2014 the Company agreed to grant Noble a first right of refusal to purchase any
additional uncontracted coal to be produced from the mine. The Uncontracted Tonnage
Offtake Agreement was entered into on 11 December 2017 and the Company indicated that
the Agreement was subject to receipt of relevant regulatory approval or failing which
shareholder approval would be required. The required regulatory approval has now been
secured in order for the contract to become effective.

Coal Resources and Coal Reserves Statement at 30 June 2018

The Company has updated the previously released Coal Resources and Coal Reserves
Statement (ASX Announcement 23 January 2017), in particular updating the Waterberg #1
Coal Resources to comply with the JORC Code 2012.

There has been no material change to the previously reported Coal Resources and Coal
Reserves as a result of this update. This is summarised as follows:
                                       Inferred      Indicated      Measured           Total
 COAL RESOURCES
                                       Resource      Resource       Resource         Resource
                                          Mt            Mt             Mt               Mt

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                                                                                              Resource Generation Limited
                                                                                           Quarterly Report to 30 June 2018


  Ledjadja #1 S & Ledjadja #3 (i)                            -                 84.0                910.8                 994.8
  Ledjadja #1 N & Ledjadja #2 (ii)                     1,479.6                    -                    -               1,479.6
  Waterberg #1 (i)                                           -                981.1                    -                 981.1
  Total – 30 June 2018                                 1,479.6              1,065.1                910.8               3,455.5
  Total – 30 June 2017                                 1,479.6                635.7              1,337.1               3,452.4
(i)     Determined by applying the JORC Code 2012
(ii)    This information was prepared and first disclosed under the JORC Code 2004. It has not been updated since to comply with the
        JORC Code 2012 on the basis that the information has not materially changed since it was last reported.


                                                                                                                 Probable
  COAL RESERVES
                                                                                                                 Reserve
                                                                                                                    Mt

  Ledjadja #1 S & Ledjadja #3 (i)                                                                                       267.1
  Total – 30 June 2018                                                                                                  267.1
  Total – 30 June 2017                                                                                                  267.1
(i)     Determined by applying the JORC Code 2012                                                                  .


2018 Draft Mining Charter

The 2018 Draft Mining Charter was gazetted on 15 June 2018 for comment. A consultation
process with key stakeholders is ongoing and the Company has initiated a review of the
proposed requirements. Resgen supports the South African Minerals Council’s stated
approach to the draft Charter. At this point it would be premature to comment on any
possible impacts on the future operations of the Company.

IPP

Due to current funding constraints, further Resgen studies and preparation of a submission
in anticipation of a further round under the Department of Energy’s (DoE) “Coal Independent
Power Producer Procurement Programme” (Coal IPP) have been put on hold. It is now likely
that this will only be progressed once the mine has been commissioned.

Working Capital Facility

Subsequent to the end of the Quarter, the Company has been in negotiations with Noble
Resources International Pte Ltd for a further extension of funds under the Facility Agreement
of 3 March 2014. This arrangement is currently being finalised and an announcement will be
made at the time of executing an agreement.
Capital Structure and Cash Position
The Company’s summarised capital structure at 30 June 2018 is as follows:

Issued fully paid ordinary shares:                           581,380,338
Performance share rights:                                    5,700,000
Cash at bank:                                                $1.7 million


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                                                                    Resource Generation Limited
                                                                 Quarterly Report to 30 June 2018

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%)

The Company has no interest in farm-in or farm-out agreements.
The Mining Right Application for Waterberg #1 was lodged at the end of 2015 and the
Company is awaiting the outcome of this process. Waterberg #1 encompasses the farm Koert
Louw Zyn Pan (PR678/2007) and is adjacent to the Boikarabelo Coal Mine.
Subsequent to the end of the Quarter, the Company received confirmation of a closure
certificate issued by the DMR in respect of the Lisbon and Zoetfontein tenements that were
issued under PR720/2007. These tenements were distant from the Boikarabelo Coal Mine
and contained minimal Coal Resources that were not included in the declared JORC Coal
Resources Statement.

On behalf of the Board of Directors
Yours faithfully


Mike Meintjes
Company Secretary
RESOURCE GENERATION LIMITED




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                                                                      Resource Generation Limited
                                                                   Quarterly Report to 30 June 2018


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             Interim Managing Director and CEO
Dr Konji Sebati                  Independent Non-Executive Director
Peter Watson                     Independent Non-Executive Director
Greg Hunter                      Alternate Non-Executive Director for M. Dahiya

Joint Company Secretaries
Mike Meintjes and Brendan O’Regan

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
                 South Africa
 Russell and Associates (Marion Brower)
 t: +27 11 880 3924
 42 Glenhove Rd, Johannesburg 2196
 Gauteng, South Africa




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                                                                                   Resource Generation Limited
                                                                                Quarterly Report to 30 June 2018


Competent Persons’ Statements
The information contained in this Quarterly Report relates to estimates of Coal Resources and
Coal Reserves 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 Dawie van Wyk is a Contract Geologist previously
contracted 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

Competent Person Area of Competency Professional                        Year of       Membership Number
                                      Society                         Registration
Riaan Joubert            Coal Resources             SACNASP*             2002              400040/02
Dawie van Wyk            Coal Resources             SACNASP*             1983              401964/83
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 consent to the inclusion of material in the form and
context in which it appears in this Quarterly Report. All are members of a Recognised
Professional Organisation in terms of the JORC Code 2012 and 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. Neither Mr Joubert nor Mr van Wyk hold
shares in Resource Generation Limited.




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                                                                          Resource Generation Limited
                                                                       Quarterly Report to 30 June 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                                       30 June 2018


                                                          Current quarter           Year to date
Consolidated statement of cash flows
                                                                                    (12 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                                                (976)                  (5,245)
        (c) production                                                       -                        -
        (d) staff costs                                                (975)                  (3,726)
        (e) administration and corporate costs                         (342)                  (1,707)
1.3     Dividends received (see note 3)                                      -                        -
1.4     Interest received                                                   43                     218
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                         (2,250)                  (10,461)
        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 12
                                                                             Resource Generation Limited
                                                                          Quarterly Report to 30 June 2018

                                                            Current quarter            Year to date
Consolidated statement of cash flows
                                                                                       (12 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                                           1,460                   10,135
3.6    Repayment of borrowings                                            (619)                  (2,550)
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                                  841                    7,585
       activities


4.     Net increase / (decrease) in cash and
       cash equivalents for the period
4.1    Cash and cash equivalents at beginning of                          3,456                    4,682
       period
4.2    Net cash from / (used in) operating                               (2,250)                (10,461)
       activities (item 1.9 above)
4.3    Net cash from / (used in) investing                                     -                      (1)
       activities (item 2.6 above)


                                             Page 8 of 12
                                                                            Resource Generation Limited
                                                                         Quarterly Report to 30 June 2018

                                                            Current quarter           Year to date
Consolidated statement of cash flows
                                                                                      (12 months)
                                                                $A’000                  $A’000
4.4    Net cash from / (used in) financing                                 841                    7,585
       activities (item 3.10 above)
4.5    Effect of movement in exchange rates on                           (318)                       (76)
       cash held
4.6    Cash and cash equivalents at end of                               1,729                    1,729
       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                                                          92                      21
5.2    Call deposits                                                     1,637                    3,435
5.3    Bank overdrafts                                                         -                        -
5.4    Other (contract retentions)                                             -                        -
5.5    Cash and cash equivalents at end of                               1,729                    3,456
       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                                     181
       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 12
                                                                               Resource Generation Limited
                                                                            Quarterly Report to 30 June 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                                        15
        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)                                   46,873                   44,982
             ?   Unsecured loan (note 2)                                     2,542                   2,542

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 at 30 June 2018 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$33.3 million has been drawn down as at
30 June 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% (an extension of the repayment date is
currently under negotiation and is expected to be finalised before the due date).
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 5 quarterly instalments remaining to be paid as at 30 June 2018.




                                                 Page 10 of 12
                                                                               Resource Generation Limited
                                                                            Quarterly Report to 30 June 2018

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

    9.2      Development                                                                            (2,274)

    9.3      Production                                                                                      -

    9.4      Staff costs                                                                            (1,176)

    9.5      Administration and corporate costs                                                          (335)

    9.6      Other – repayment of borrowings                                                             (591)

    9.7      Total estimated cash outflows (prepared on the                                         (4,376)
             basis that additional working capital is secured as
             noted in the Quarterly Activities Report)


    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 July 2018
                       (Company secretary)


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




                                                 Page 11 of 12
                                                                             Resource Generation Limited
                                                                          Quarterly Report to 30 June 2018

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 12 of 12

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