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RESOURCE GENERATION LIMITED - Quarterly Report for the three months ended 31 December 2019

Release Date: 31/01/2020 15:10
Code(s): RSG     PDF:  
 
Wrap Text
Quarterly Report for the three months ended 31 December 2019

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”)


                                  Quarterly Report
               for the three months ended 31 December 2019 (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
Firstly, on 3 December 2019 the Company announced that along with its partly owned
subsidiary, Ledjajdja Coal (Pty) Ltd, it had entered into two non-binding term sheets, being
equity and debt term sheets with a Lending Syndicate for the funding of the Boikarabelo Coal
Project.

On 5 December 2019, the Company then advised that principal binding agreements for
funding of the construction of the Project had been executed with the Lending Syndicate. The
key terms of the Project Funding Agreements mirror the terms set out in the non-binding
Term Sheets announced on 3 December 2019.

The members of the Lending Syndicate were identified as:

•       Government Employees Pension Fund and the Unemployment Insurance Fund, (both
        managed by the Public Investment Corporation SOC Limited (PIC);

•       Industrial Development Corporation of South Africa Limited (IDC); and

•       Noble Resources International Pte Ltd (Noble).


                                              Page 1 of 9
                                                                       Resource Generation Limited
                                                              Quarterly Report to 31 December 2019

The ability to draw-down on facilities established under the Project Funding Agreements
(Financial Close) is subject to the satisfaction of a number of conditions precedent, including
Shareholder approval at an Extraordinary General Meeting (EGM) called for that purpose,
conclusion of an unconditional fully funded Project Rail Link funding agreement and related
infrastructure agreements related to the Project Rail Link and conclusion of a Ramp-up
Working Capital Facility.

The Company has commissioned the preparation of an Independent Expert’s Report for
inclusion in the EGM Notice of Meeting. The Independent Expert has advised that their Report
will be available in early February. This will enable the Company to finalise the meeting
documentation, secure the required ASX clearance and to then advise Shareholders of the
date and location for the EGM.

Rail Link negotiations for a funding package of R750m (approx. A$75m) are at an advanced
stage. The funding is required to construct the 44km rail infrastructure linking the mine to the
Transnet main line.

Due to delays in reaching Financial Close, the Company has received approval from the Board
of Noble Group to provide an additional working capital facility to its partially owned
subsidiary, Ledjadja Coal (Pty) Ltd, to cover projected needs through to 31 March 2020. The
approval involves the extension of the Facility Agreement with Noble Group and amendment
of the first repayment date from 30 September 2019 to 31 March 2020. These terms have
now been incorporated into a Seventh Deed of Amendment to the Facility Agreement and
were executed 11 December 2019.

The Company continues to target Financial Close by 31 March 2020 however there are a
number of conditions precedent associated with the Project Funding Agreements that are
outside of its direct control.

The Company will keep the market informed in accordance with its continuous disclosure
obligations.

Capital Structure and Cash Position)

The Company’s summarised capital structure at 31 December 2019 is as follows:

Issued fully paid ordinary shares:           581,380,338
Performance share rights:                    3,000,000
Cash at bank:                                $1.29 million
Noble Facility – undrawn                     $US1.5 million

Shareholders and potential investors should also review the Company’s 2019 Annual Report
and the audited Financial Report for the year ending 30 June 2019 to fully appreciate the
Company’s financial position. The Company is in discussions with Noble Group regarding
further funding, should this be required, in order to reach Financial Close.




                                          Page 2 of 9
                                                                     Resource Generation Limited
                                                            Quarterly Report to 31 December 2019

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
Company Secretary

RESOURCE GENERATION LIMITED
Corporate information
Directors
Lulamile Xate                  Non-Executive Chairman
Rob Croll                      Lead Independent Non-Executive Director
Greg Hunter                    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
Manish Dahiya                  Alternate Non-Executive Director for G Hunter

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

                                          Page 3 of 9
                                                                                   Resource Generation Limited
                                                                          Quarterly Report to 31 December 2019


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) Limited

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 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
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 Mr Joubert, or VBKOM, have material interest or entitlement, direct
or indirect, in the securities of Resource Generation Limited.




                                                       Page 4 of 9
                                                                          Resource Generation Limited
                                                                 Quarterly Report to 31 December 2019


                                                                                              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 2019




Consolidated statement of cash flows                    Current quarter          Year to date
                                                            $A’000               (6 months)
                                                                                   $A’000
1.      Cash flows from operating activities
1.1     Receipts from customers                                             -                       -
1.2     Payments for
        (a) exploration & evaluation (if expensed)                          -                       -
        (b) development                                              (1,205)                 (1,592)
        (c) production                                                      -                       -
        (d) staff costs                                                (501)                 (1,102)
        (e) administration and corporate costs                         (370)                   (674)
1.3     Dividends received (see note 3)                                     -                       -
1.4     Interest received                                                  24                     49
1.5     Interest and other costs of finance paid                            -                       -
1.6     Income taxes paid                                                   -                       -
1.7     Government grants and tax incentives                                -                       -
1.8     Other (provide details if material)                                 -                       -
1.9     Net cash from / (used in) operating                          (2,052)                 (3,319)
        activities


2.      Cash flows from investing activities
2.1     Payments to acquire:
        (a) entities                                                        -                       -
        (b) tenements                                                       -                       -
        (c) property, plant and equipment                                   -                       -
        (d) exploration & evaluation (if capitalised)                       -                       -


                                              Page 5 of 9
                                                                        Resource Generation Limited
                                                               Quarterly Report to 31 December 2019

Consolidated statement of cash flows                    Current quarter        Year to date
                                                            $A’000             (6 months)
                                                                                 $A’000
       (e) investments                                                    -                      -
       (f)   other non-current assets                                     -                      -
2.2    Proceeds from the disposal of:
       (a) entities                                                       -                      -
       (b) tenements                                                      -                      -
       (c) property, plant and equipment                                  -                      -
       (d) investments                                                    -                      -
       (e) 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 equity securities
       (excluding convertible debt securities)                            -                      -
3.2    Proceeds from issue of convertible debt                            -                      -
       securities
3.3    Proceeds from exercise of options                                  -                      -
3.4    Transaction costs related to issues of equity                      -                      -
       securities or convertible debt securities
3.5    Proceeds from borrowings                                     2,142                   3,618
3.6    Repayment of borrowings                                            -                  (526)
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                          2,142                   3,092
       activities


4.     Net increase / (decrease) in cash and
       cash equivalents for the period
4.1    Cash and cash equivalents at beginning of                    1,159                   1,474
       period
4.2    Net cash from / (used in) operating                         (2,052)                 (3,319)
       activities (item 1.9 above)
4.3    Net cash from / (used in) investing activities                     -                      -
       (item 2.6 above)



                                             Page 6 of 9
                                                                                   Resource Generation Limited
                                                                          Quarterly Report to 31 December 2019

Consolidated statement of cash flows                           Current quarter               Year to date
                                                                   $A’000                    (6 months)
                                                                                               $A’000
4.4      Net cash from / (used in) financing activities                         2,142                       3,092
         (item 3.10 above)
4.5      Effect of movement in exchange rates on                                    43                          45
         cash held
4.6      Cash and cash equivalents at end of                                    1,292                       1,292
         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                                                             108                          69
5.2      Call deposits                                                          1,184                       1,090
5.3      Bank overdrafts                                                              -                             -
5.4      Other (provide details)                                                      -                             -
5.5      Cash and cash equivalents at end of                                    1,292                       1,159
         quarter (should equal item 4.6 above)



6.       Payments to related parties of the entity and their                                Current quarter
         associates                                                                             $A'000
6.1      Aggregate amount of payments to related parties and their                                             180
         associates included in item 1
6.2      Aggregate amount of payments to related parties and their                                                      -
         associates included in item 2
Note: if any amounts are shown in items 6.1 or 6.2, your quarterly activity report must include a description of,
and an explanation for, such payments

Directors’ remuneration
Payments to related parties of the entity and their associates (6.1) includes the remuneration of Directors for the
quarter ending 31 December 2019.




                                                  Page 7 of 9
                                                                                     Resource Generation Limited
                                                                            Quarterly Report to 31 December 2019

7.      Financing facilities                                          Total facility      Amount drawn at
        Note: the term “facility’ includes all forms of financing   amount at quarter       quarter end
        arrangements available to the entity.
                                                                          end                 $A’000
        Add notes as necessary for an understanding of the
        sources of finance available to the entity.                     $A’000
7.1     Loan facilities                                                         66,878                  64,739
7.2     Credit standby arrangements                                                   -                       -
7.3     Other (please specify)                                                        -                       -
7.4     Total financing facilities                                              66,878                  64,739


7.5     Unused financing facilities available at quarter end                                             2,139
7.6     Include in the box below a description of each facility above, including the lender, interest
        rate, maturity date and whether it is secured or unsecured. If any additional financing
        facilities have been entered into or are proposed to be entered into after quarter end,
        include a note providing 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$46.9 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$45.4 million has been drawn down as at 31 December 2019.
The loan is repayable in quarterly instalments over 78 months commencing from 31 March 2020
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.


8.      Estimated cash available for future operating activities                                $A’000
8.1     Net cash from / (used in) operating activities (Item 1.9)                                       (2,052)
8.2     Capitalised exploration & evaluation (Item 2.1(d))                                                    -
8.3     Total relevant outgoings (Item 8.1 + Item 8.2)                                                  (2,052)
8.4     Cash and cash equivalents at quarter end (Item 4.6)                                              1,292
8.5     Unused finance facilities available at quarter end (Item 7.5)                                    2,139
8.6     Total available funding (Item 8.4 + Item 8.5)                                                    3,431
8.7     Estimated quarters of funding available (Item 8.6 divided by                                       1.67
        Item 8.3)
8.8     If Item 8.7 is less than 2 quarters, please provide answers to the following questions:
        1.        Does the entity expect that it will continue to have the current level of net operating
                  cash flows for the time being and, if not, why not?
        Answer:
        Yes
        2.        Has the entity taken any steps, or does it propose to take any steps, to raise further
                  cash to fund its operations and, if so, what are those steps and how likely does it
                  believe that they will be successful?
        Answer:
        Yes. The Company is in the process of completing outstanding conditions precedent to
        achieve Financial Close and draw-down funds under the Project Funding Agreements
        executed on 5 December 2019. Discussions have also commenced with a related party on
        being able to access additional funding should this be required to reach Financial Close.


                                                        Page 8 of 9
                                                                                                    Resource Generation Limited
                                                                                           Quarterly Report to 31 December 2019

            3.        Does the entity expect to be able to continue its operations and to meet its business
                      objectives and, if so, on what basis?
            Answer:
            Yes, refer to 2 above.



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.




Date:               .....31 January 2020..............................................................................




Authorised by: .......Resgen Board of Directors............................................................................
                    (Name of body or officer authorising release – see note 4)



Notes
1.      This quarterly cash flow report and the accompanying activity report provide a basis for informing the market about the
        entity’s activities for the past quarter, how they have been financed and the effect this has had on its cash position. An
        entity that wishes to disclose additional information over and above the minimum required under the Listing Rules is
        encouraged to do so.
2.      If this quarterly cash flow 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 cash flow 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.
4.      If this report has been authorised for release to the market by your board of directors, you can insert here: “By the
        board”. If it has been authorised for release to the market by a committee of your board of directors, you can insert
        here: “By the name of board committee – eg Audit and Risk Committee”. If it has been authorised for release to the
        market by a disclosure committee, you can insert here: “By the Disclosure Committee”.
5.      If this report has been authorised for release to the market by your board of directors and you wish to hold yourself out
        as complying with recommendation 4.2 of the ASX Corporate Governance Council’s Corporate Governance Principles
        and Recommendations, the board should have received a declaration from its CEO and CFO that, in their opinion, the
        financial records of the entity have been properly maintained, that this report complies with the appropriate accounting
        standards and gives a true and fair view of the cash flows of the entity, and that their opinion has been formed on the
        basis of a sound system of risk management and internal control which is operating effectively.




                                                             Page 9 of 9

Date: 31-01-2020 03:10:00
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