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RESOURCE GENERATION LIMITED - Quarterly Report for the three months ended 31 December 2018 (Quarter)

Release Date: 29/01/2019 08:05
Code(s): RSG     PDF:  
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Quarterly Report for the three months ended 31 December 2018 (Quarter)

  Resource Generation Limited
  Registration number ACN 059 950 337
  (Incorporated and registered in Australia)
  ISIN: AU000000RES1
  Share Code on the ASX: RES
  Share Code on the JSE: RSG
  (“Resgen” or the “Company”)
                              Resource Generation Limited
                                          ACN 059 950 337

                               Quarterly Report
            for the three months ended 31 December 2018 (Quarter)

 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
During the Quarter the Company updated all Independent Technical Expert Reports
(Technical, Marketing, Environmental and Legal) and submitted these to the Syndicate Lender
(ASX Announcement 12 November 2018) preparing their Credit Committee submission. The
Lender’s Deal Team confirmed that this Lender remains committed to the Project from a
technical, commercial and strategic perspective and that they were satisfied with the content
of the updated Expert Reports.

Management maintained regular contact with the Lender’s Deal Team over this period in
anticipation that both Credit Committee and subsequent Board approval could be finalised
before the Christmas break in South Africa. When it became apparent in early December 2018
that this timeline would not be met, the Company elevated the priority of progressing (in
tandem) a mitigation strategy through an alternative funding option with a party or parties
as a substitute in the current proposed Lending Syndicate (first reported in ASX
Announcement 20 August 2018).

This further delay has impacted the targeted date for financial close of 31 March 2019 as
disclosed in our 2018 Annual Report. The Board and Management have therefore been
focused on strategies to conserve cash and/or secure any required additional financial


                                           Page 1 of 10
                                                                     Resource Generation Limited
                                                            Quarterly Report to 31 December 2018

support whilst a new timetable can be determined with the appropriate level of certainty to
advise Shareholders.

Plans for the forthcoming quarter

Since reopening the office in early January 2019, the Company has re-engaged with members
of the Lending Syndicate (see credit approval process outlined in ASX Announcement: 3
March 2018) as this remains the preferred option. These discussions have indicated that this
alternative is worthy of prioritising in the forthcoming quarter.

Shareholders are cautioned that the further plans for the forthcoming Quarter involve a
number of matters outside of the control of the Company, however the broad focus of
activities is anticipated to be on:

   .   Securing all remaining credit approvals from the Lending Syndicate for funding the
       mine development;
   .   On the basis that credit approvals are secured from all parties to the Lending
       Syndicate, harmonising the term sheets for any final matters that are raised through
       credit review;
   .   Finalising negotiations to secure terms for the commitment to fund the 44km rail loop
       and link;
   .   Updating all final inputs and assumptions for the two funding packages in the Base
       Case Financial Model (BCFM) for the Project and tabling these appropriately
       supported proposals for consideration and approval with the Board; and
   .   Proceeding with plans to schedule a meeting to secure Shareholder approval for the
       proposed mine development funding.

In order to reach Financial Close in a subsequent quarter (and assuming the matters above
are all achieved), the focus will then be on securing Shareholder approval, preparing finance
documents in accordance with the agreed common term sheets and addressing all conditions
precedent for first drawdown of development funds.

Board of Directors

During the quarter, Mr Michael Gray was appointed as a Non-Executive Director of the
Company (ASX Announcement 30 November 2018). Michael was appointed to the Board
following the resignation of Mr Peter Watson as a Non-Executive Director of the Company.
The appointment ensures continued compliance with the Corporations Act requirement for a
public company to have two Australian resident directors.

Mr Rob Croll was appointed to the position of Lead Independent Director (ASX Announcement
30 November 2018).

Working Capital Facility

The Company agreed a further extension of the Facility Agreement of 3 March 2014 (Facility),
under which Noble Resources International Pte Ltd made available additional funds of up to
US$4.7m to the Company's subsidiary, Ledjadja Coal (Pty) Ltd (LCL) to fund operations whilst
project funding is secured (ASX Announcement 30 October 2018). The total Facility made

                                        Page 2 of 10
                                                                        Resource Generation Limited
                                                               Quarterly Report to 31 December 2018

available to the Company at quarter end was US$41.9m. The additional funds are being made
available on substantially the same terms as the existing Facility and are being drawn in
monthly tranches over the period to 31 March 2019. The only major change to the terms of
the facility is that the total Facility is now secured by a pledge over Resgen's interest in 74%
of the shares in Ledjadja, which are held by another Resgen subsidiary, Resgen Africa Holdings
Limited (RAHL).
Finance function
The Company would like to thank Mr Brendan O’Regan for his energetic and committed
involvement as CFO since early 2016 and his assistance in progressing finance approvals for
the development of the Boikarabelo Mine. He departs from the Company on 31 January 2019.

It is envisaged that there will be no immediate appointment of a replacement CFO. The Board
is considering the allocation of his responsibilities across existing finance personnel with clear
designation of the person responsible for financial reporting to the Board and Shareholders,
until a replacement CFO is appointed.

Capital Structure and Cash Position

The Company’s summarised capital structure at 31 December 2018 is as follows:

Issued fully paid ordinary shares:            581,380,338
Performance share rights:                     5,700,000
Cash at bank:                                 $1.24 million

Shareholders and potential investors should also review the Company’s 2018 Annual Report
and the audited Financial Report for the year ending 30 June 2018 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.

On behalf of the Board of Directors
Yours faithfully
Mike Meintjes
Joint Company Secretary
RESOURCE GENERATION LIMITED


                                           Page 3 of 10
                                                                             Resource Generation Limited
                                                                    Quarterly Report to 31 December 2018


Corporate information
Directors
Lulamile Xate                      Non-Executive Chairman
Rob Croll                          Lead Independent Non-Executive Director
Manish Dahiya                      Non-Executive Director
Colin Gilligan                     Independent Non-Executive Director
Michael Gray                       Independent Non-Executive Director
Leapeetswe Molotsane               Interim Managing Director and CEO
Dr Konji Sebati                    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

JSE Sponsor: Deloitte & Touche Sponsor Services (Pty) Ltd




                                                Page 4 of 10
                                                                                   Resource Generation Limited
                                                                          Quarterly Report to 31 December 2018


Competent Persons’ Statements
The information contained in this Quarterly Report relates to estimates of Coal Resources and
Coal Reserves and 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 engaged 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
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. Both 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. Mr Joubert holds no shares in Resource
Generation Limited.




                                                      Page 5 of 10
                                                                          Resource Generation Limited
                                                                 Quarterly Report to 31 December 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 December 2018


                                                          Current quarter          Year to date
Consolidated statement of cash flows
                                                                                    (6 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                                                (2,393)               (4,160)
        (c) production                                                       -                      -
        (d) staff costs                                                 (980)                (2,041)
        (e) administration and corporate costs                          (449)                  (846)
1.3     Dividends received (see note 3)                                      -                      -
1.4     Interest received                                                   46                    75
1.5     Interest and other costs of finance paid                             -                      -
1.6     Income taxes (paid)/refunded                                         -                      -
1.7     Research and development refunds                                     -                      -
1.8     Other                                                                -                      -
1.9     Net cash from / (used in) operating                          (3,776)                 (6,972)
        activities


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

                                           Page 6 of 10
                                                                            Resource Generation Limited
                                                                   Quarterly Report to 31 December 2018

                                                            Current quarter          Year to date
Consolidated statement of cash flows
                                                                                      (6 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                                     -                     -
       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                                           3,697                 7,634
3.6    Repayment of borrowings                                            (569)                (1,152)
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                                3,128                 6,482
       activities


4.     Net increase / (decrease) in cash and
       cash equivalents for the period
4.1    Cash and cash equivalents at beginning of                          1,886                 1,729
       period
4.2    Net cash from / (used in) operating                               (3,776)               (6,972)
       activities (item 1.9 above)
4.3    Net cash from / (used in) investing                                     -                     -
       activities (item 2.6 above)


                                             Page 7 of 10
                                                                            Resource Generation Limited
                                                                   Quarterly Report to 31 December 2018

                                                            Current quarter          Year to date
Consolidated statement of cash flows
                                                                                      (6 months)
                                                                $A’000                  $A’000
4.4    Net cash from / (used in) financing                               3,128                  6,482
       activities (item 3.10 above)
4.5    Effect of movement in exchange rates on                                2                       1
       cash held
4.6    Cash and cash equivalents at end of                               1,240                  1,240
       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                                                      212                        52
5.2    Call deposits                                                     1,028                  1,834
5.3    Bank overdrafts                                                        -                       -
5.4    Other (contract retentions)                                            -                       -
5.5    Cash and cash equivalents at end of                               1,240                  1,886
       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                                    176
       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




                                             Page 8 of 10
                                                                               Resource Generation Limited
                                                                      Quarterly Report to 31 December 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                                        -
       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



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
                                                                                                   53,965
           ?    Secured loan (note 1)                                     58,053
                                                                           1,520                    1,520
           ?    Unsecured loan (note 2)
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$41.9 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$38.95 million has been drawn down as at 31 December 2018.
The loan is repayable in quarterly instalments over 78 months commencing from 30 June 2019 and
has an annual interest rate of 10.75%. The Company has provided a Parent Company Guarantee for
the Facility along with a pledge over Resgen's interest in 74% of the shares in Ledjadja, which are
held by another Resgen subsidiary, Resgen Africa Holdings Limited.
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 3 quarterly instalments remaining to be paid as at 31 December 2018.
The Company has provided a Parent Company Guarantee for the loan.

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

9.2    Development                                                                                (2,139)

9.3    Production                                                                                       -

9.4    Staff costs                                                                                  (895)

9.5    Administration and corporate costs                                                           (523)

9.6    Other – repayment of borrowings                                                              (559)

9.7    Total estimated cash outflows                                                              (4,116)



                                                 Page 9 of 10
                                                                                  Resource Generation Limited
                                                                         Quarterly Report to 31 December 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: 29 January 2019
                        (Company secretary)
Print name:          MICHAEL MEINTJES
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 10 of 10

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