Wrap Text
Execution of non-binding Term Sheets for the funding of the Rail Link to connect the Boikarabelo Coal Mine
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”)
5 May 2020
Execution of non-binding Term Sheets for the funding of the Rail Link to connect
the Boikarabelo Coal Mine to the Transnet Main Line
Resource Generation Limited (ASX:RES/JSE:RSG)(Company or ResGen) is pleased to
announce that its subsidiary, Ledjadja Coal Pty Ltd (Ledjadja Coal), has entered into non-
binding equity and debt term sheets (collectively, the Term Sheets) with Pan African
Infrastructure Development Fund 2 SA and PAIDF2 LLC (PAIDF 2) or any one of them
(Senior Lender and Investor) under the management of Harith General Partners
Proprietary Limited (Harith) for the funding of the Boikarabelo Coal Project Rail Link (Rail
Link).
Although interim approvals have been given by Harith at various stages of the negotiations,
the Term Sheets are not legally binding on the parties until final approval by the Harith
Investment Committee and Board.
The finance arrangements contemplated in the Term Sheets are not exhaustive and are
indicative only and remain subject to, among other things, the required approvals and the
parties reaching agreement on definitive and legally binding documentation recording the
terms and conditions set out in the Term Sheets and subsequent satisfaction of all
conditions precedent.
The Company’s Interim Managing Director and Interim CEO, Leapeetswe "Papi"
Molotsane, commented:
“Execution of these terms sheets is very significant and marks another important
milestone in our pursuit of full funding for the construction of the Boikarabelo Mine.
The Mine Funding Package approved by Shareholders on 7 April 2020 includes a
number of conditions precedent including finalisation of the rail link funding
arrangements and execution of these term sheets brings us a step closer to
Financial Close of the funding packages. All parties to this transaction have
Resource Generation Limited (ACN 059 950 337)
c/o Level 1, 17 Station Road, Indooroopilly, QLD 4068
GPO Box 126, Albion QLD 4010. Phone +27 (012) 345 1057 Fax +27 (012) 345 5314
www.resgen.com.au
committed to secure the final approvals and to execute the legally binding
documentation as quickly as possible and hopefully by end May 2020.
In parallel with the negotiation of the rail link funding package, we continue to make
good progress on satisfaction of all other conditions precedent to the mine funding
package.”
• Background
The Company advised the market (ASX Announcement: 17 February 2020) that
negotiations were underway to secure funding for the construction of a 44km rail link to
join the Boikarabelo Mine (Mine) with the Transnet main line. It was noted that negotiations
were proceeding on the basis of establishing a special purpose vehicle (SPV) to raise the
required funds, construct, own and operate the rail link in exchange for a commercially
agreed transport tariff arrangement with Ledjadja Coal. Bula Waterberg Rail (Pty) Ltd has
now been incorporated in South Africa as the SPV for this purpose (Borrower).
The rail link negotiations had been proceeding on the basis of a R750m (approx. A$62.4m
at current exchange rates) funding package with Ledjadja Coal owning a 49.9% interest in
the SPV in lieu of contributing certain assets and licences associated with the rail link.
A recent review of the rail link funding requirements has identified the opportunity to reduce
the total funding requirement to approximately R700m (approx. A$58.3m at current
exchange rates).
• Rail Link Funding Partner
Harith (www.harith.co.za) is a well established infrastructure fund manager developing
critical infrastructure projects across the African continent. Harith has been involved with
several high profile transactions and run two funds with US$1 Billion under management.
• Composition of the Rail Link Funding Package
The funding package has a debt component and an equity component, with each of these
components being the subject of a separate term sheet. A summary of the key non-binding
terms contained in each term sheet is set out below:
(i) Debt Component
The debt facility will comprise a Senior Loan of up to the US dollar equivalent of R397m
(approx. US$21.2m at current exchanges rates). The loan will be disbursed in Rand but
be expressed as a US dollar loan for the purposes of repayment.
The term of the Senior Loan is nine years from the date of achievement of Financial Close 1
for the rail link funding arrangement and will be made available for the period from Financial
Close to a date three months after the scheduled completion date for construction of the
rail link.
1. Defined as the date on which all conditions precedent (CPs) to utilising the Senior Loan Facility have been fulfilled to the
satisfaction of the Senior Lenders or waived
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Any costs associated with unwinding the funding arrangement, including hedges or
forward cover taken out by the Senior Lender and Investor after execution of the Term
Sheets will be borne by Ledjadja Coal or Resgen irrespective of whether the transaction
proceeds to completion.
Loan repayments will be made in accordance with a quarterly repayment schedule to be
determined with reference to the final approved financial model for the rail link project. The
first scheduled repayment under the Senior Loan facility shall occur on a date falling 28
months after Financial Close for the rail link funding. This timing allows for alignment with
targeted completion and operational readiness of the coal handling and preparation plant
at the Mine.
The Senior Loan will front rank and will be secured by a comprehensive security package
over all or substantially all of the Borrower’s assets including a pledge over shares held by
shareholders in the Borrower. It is important to note that security arrangements associated
with the rail link funding will be ring-fenced to the SPV i.e. there will be no impact on the
security arrangements pertaining to the Mine Funding Package recently approved by
Shareholders.
The interest rate will be 12% p.a. based on the underlying US dollar outstanding balance
and be payable on a quarterly basis. Provision exists for an interest capitalisation and
capital grace period that extends six months beyond the planned rail link construction
period with capitalisation on a quarterly basis.
Default interest will apply at a rate of 200 basis points above the agreed interest rate.
Financial covenants will be applied based on debt service cover, interest cover and
debt:equity ratios.
All legal and other expenses reasonably incurred by the Senior Lender in connection with
the negotiation, preparation and execution of the finance documentation will be borne by
the Borrower.
An exclusivity period of three months from the date of signing the Term Sheet applies to
prohibit any further fundraising activities by the Borrower, Ledjadja Coal and Resgen in
relation to the Mine. In addition, a break fee applies should the rail link funding reach
Financial Close with another funder within 12 months of signing the Term Sheet.
Set out under a separate heading below are the material conditions precedent that apply
to the Term Sheets.
(ii) Equity Component
The Equity Term Sheet contemplates, subject to satisfaction or waiver of all relevant
conditions precedent, that equity finance will be made available by the investors in the SPV
which, together with the debt funding arrangements contemplated under the Debt Term
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Sheet, will fund the development and construction of the rail link to the Mine. The equity
finance will be provided by subscribing to shares in the SPV on the following basis:
. 50.1% by the Investor (PAIDF 2) through the subscription for shares in the Borrower
for the consideration of R300m (approx. A$25m at current exchange rates); and
. 49.9% by Ledjadja Coal by the transfer and registration of servitudes crossing 11
properties and transfer the development capital work expended to date on the rail link
which has a book value of R165m (approx. A$13.7m at current exchange rates).
The arrangement will be governed by a Shareholders’ Agreement and a Memorandum of
Incorporation for the SPV. The Shareholders’ Agreement to include certain reserved
matters consistent with the nature of an SPV and providing a protection of the rights
established under the Term Sheets. Each Shareholder will have the right to appoint or
replace one director for each complete 20% holding in the SPV. An independent director
is also expected to be appointed to the Board. The first Chairman of the Board (appointed
from the existing Board members) to be appointed by Ledjadja Coal until the end of
construction and thereafter to be appointed by PAIDF 2 and finally the position of
chairperson will be rotated on a two yearly basis.
A twenty year rail tariff agreement will be entered into between the Borrower and Ledjadja
Coal which achieves an internal rate of return for the Investor of at least 15% in US dollar
terms using the forecast production profile from the Mine.
The funding for construction of the rail link to be contributed initially from the funds raised
from the share subscription followed by drawdown under the Senior Loan facility.
Resgen and or Ledjadja Coal to have the right to an annual haulage capacity of not less
than 6 million tonnes and a first right to any additional tonnes from the Mine and preferred
tariff terms (discount) for any additional tonnes.
Distributions of 100% of the free cashflows generated by the SPV will be distributed on a
quarterly basis.
Standard pre-emptive rights to apply to any proposed transfer or sale of ordinary shares
in the SPV with no drag or tag along rights. Any agreed sale of equity and/or the business
of the SPV to Transnet at some future date can only occur if the existing usage rights of
Ledjadja Coal are retained and the remaining conditions set out by the remaining
shareholders in the SPV are fulfilled.
Exclusivity and break fee terms consistent with the Debt Term Sheet.
. Material Conditions Precedent
A number of conditions require satisfaction or deferral or may be waived by the Senior
Lender before Financial Close. These conditions include those customary for Lender’s
to request to manage risk exposures on transactions of this nature including, but not
limited to:
. Harith Investment Committee and Board approval;
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. Execution of the Share Subscription and Shareholders’ Agreement of the Borrower;
. Execution of all finance documents;
. Any regulatory approvals including the registration of each servitude to effect the
transaction;
. Notice that the transaction security has been granted; and
. The Mine Funding Package being fully funded and all conditions precedent for
commencement of the Mine having been met.
Further information
The Company will keep the market informed on progress in accordance with its continuous
disclosure obligations.
On behalf of the Board
Lulamile Xate
Chairman
For further information please contact:
Lulamile Xate, Chairman on info@resgen.com.au or +27 11 010 6310
Mike Meintjes, Company Secretary on mmeintjes@resgen.com.au or +61 413 706 143
Media enquiries:
South Africa: Marion Brower / Charmane Russell on +27 11 880 3924
JSE Sponsor:
Deloitte & Touche Sponsor Services (Pty) Limited
About ResGen:
Resource Generation Limited (ResGen) is an emerging ASX and JSE-listed energy
company, currently developing the Boikarabelo Coal Mine in South Africa’s Waterberg
region. The Waterberg accounts for around 40% of the country’s currently known coal
resources. The Coal Resources and Reserves for the Boikarabelo Coal Mine, held through
the operating subsidiary Ledjadja Coal, were recently updated based upon a new mine
plan and execution strategy. The Boikarabelo Coal Resources total 995Mt and the Coal
Reserves total 267Mt applying the JORC Code 2012 (ASX Announcement :23 January
2017- 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 subsidiary (BEE)
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operating under South Africa’s Broad-based Black Economic Empowerment Act, Section
9(5): Codes of Good Practice
Based on the information currently available to it, ResGen is aware that that PIC, Noble
Group and Altius Investment Holdings each have substantial shareholdings in ResGen.
Forward looking statements
This announcement contains certain forward-looking statements. Forward-looking
statements include those containing words such as “anticipate”, “believe”, “expect”,
“project”, “forecast”, “estimate”, “likely”, “intend”, “should”, “could”, “may”, “target”, “plan”,
“consider”, “foresee”, “aim”, “will” and other similar expressions. Any forward-looking
statements, opinions and estimates provided in this announcement are based on
assumptions and contingencies which are subject to change without notice and involve
known and unknown risks and uncertainties and other factors which are beyond the control
of ResGen. This includes any statements about the terms on which ResGen might obtain
funding from the Senior Lender and Investor. To the maximum extent permitted by law,
the directors of ResGen, ResGen and any of its related bodies corporate and affiliates,
and their officers, partners, employees, agents, associates and advisers disclaim any
obligations or undertaking to release any updates or revisions to the information in this
announcement to reflect any change in expectations or assumptions, do not make any
representation or warranty, express or implied, as to the accuracy, reliability or
completeness of such information, or likelihood of fulfillment of any forward-looking
statement or any event or results expressed or implied in any forward-looking statement,
and disclaim all responsibility and liability for these forward-looking statements (including,
without limitation, liability for negligence).
The term sheets referred to in this ASX announcement are non-binding and indicative in
nature. Negotiations regarding the transactions described in those term sheets are
ongoing and incomplete and there is no certainty that a transaction will be concluded based
on the terms set out in those Term Sheets (or at all). ResGen makes no representations
or warranties whatsoever as to the outcome of its engagement with the Senior Lender and
Investor.
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Date: 05-05-2020 10:00:00
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