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RESOURCE GENERATION LIMITED - Quarterly Report for the three months ended 31 December 2020 (Quarter)

Release Date: 29/01/2021 08:45
Code(s): RSG     PDF:  
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Quarterly Report for the three months ended 31 December 2020 (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”)

29 January 2021



                              Resource Generation Limited
                                          ACN 059 950 337

                               Quarterly Report
            for the three months ended 31 December 2020 (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
On 28 October 2020, the Company advised that due to delays in satisfying certain Conditions
Precedent to reaching Financial Close for first drawdown under the Mine Funding Package,
the Company was in the process of securing formal sign off of the extension of the Common
Terms Agreement (see ASX Announcements of 10 September and 22 October 2020).

Due to delays in satisfying certain Conditions Precedent to reaching Financial Close for first
drawdown under the Mine Funding Package, the Company was advised that the IDC
(Industrial Development Corporation of South Africa) had made a decision to not grant an
extension of the Common Terms Agreement and after completing a due diligence
investigation (for the purpose of considering the extension) a view had been formed that the
market conditions under which the Boikarabelo Coal Project would operate had deteriorated
materially. Based on the findings, the IDC’s Special Credit Committee resolved that IDC should
not grant an extension of the Common Terms Agreement. Further, the IDC Special Credit


                                           Page 1 of 9
                                                                       Resource Generation Limited
                                                              Quarterly Report to 31 December 2020

Committee also decided to cancel all previously approved facilities under the Mine Funding
Package (see ASX Announcement 28 October 2020).

A trading halt followed by a voluntary suspension request was lodged with the ASX in order
for the Company to develop a plan to secure additional working capital to enable alternative
development options for the Project to be explored.

The Company announced on 14 December 2020 that it had executed the legal documentation
to reflect the in-principle additional financial support agreed with Noble Group in the form of
a Ninth Deed of Amendment and Restatement to the Facility Agreement dated 3 March 2014
as amended from time to time. The additional financial support of US$920,000 is to be made
available in three instalments to cover an austerity operational budget for the period through
to 28 February 2021.

Noble Group, as secured creditor, has also appointed Macquarie Advisory and Capital Markets
as its Financial Advisor to work with the Company in a strategic review process to identify
alternative capital structure options for development of our Project. At the date of this Report
the process is continuing with a shortlist of parties identified for more in-depth discussions.

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 2020 is as follows:

Issued fully paid ordinary shares:           581,380,338
Performance share rights:                    3,000,000
Cash at bank:                                A$0.68 million
Noble Facility – undrawn                     US$0.31 million

Shareholders and potential investors should also review the Company’s 2020 Annual Report
and the audited Financial Report for the year ending 30 June 2020 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.



                                          Page 2 of 9
                                                                        Resource Generation Limited
                                                               Quarterly Report to 31 December 2020




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

Company Secretary
Mike Meintjes

Registered office
Level 1, 17 Station Road
Indooroopilly, QLD 4068, Australia

Telephone:      +27 11 010 6310
Facsimile:      +27 86 539 3792
Website:        www.resgen.com.au

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

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

JSE Sponsor:

Deloitte & Touche Sponsor Services (Pty) Limited

                                           Page 3 of 9
                                                                                   Resource Generation Limited
                                                                          Quarterly Report to 31 December 2020




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

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 2020


                                                                                              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 2020




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                                          -                     -
        (b) development                                                (791)                 (1,527)
        (c) production                                                        -                     -
        (d) staff costs                                                (469)                 (1,085)
        (e) administration and corporate costs                         (251)                   (586)
1.3     Dividends received (see note 3)                                       -                     -
1.4     Interest received                                                   14                    25
1.5     Interest and other costs of finance paid                              -                     -
1.6     Income taxes paid                                                  (72)                 (72)
1.7     Government grants and tax incentives                                  -                     -
1.8     Other (provide details if material)                                   -                     -
1.9     Net cash from / (used in) operating                          (1,569)                 (3,245)
        activities


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


                                              Page 5 of 9
                                                                        Resource Generation Limited
                                                               Quarterly Report to 31 December 2020

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                                       777                   3,544
3.6    Repayment of borrowings                                            -                      -
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                            777                   3,544
       activities


4.     Net increase / (decrease) in cash and
       cash equivalents for the period
4.1    Cash and cash equivalents at beginning of                    1,412                     323
       period
4.2    Net cash from / (used in) operating                         (1,569)                 (3,245)
       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 2020

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                                     777                           3,544
          (item 3.10 above)
4.5       Effect of movement in exchange rates on                                             58                              56
          cash held
4.6       Cash and cash equivalents at end of                                                678                              678
          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                                                                      155                              144
5.2       Call deposits                                                                      523                           1,268
5.3       Bank overdrafts                                                                       -                               -
5.4       Other (provide details)                                                               -                               -
5.5       Cash and cash equivalents at end of                                                678                           1,412
          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                                              76
          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 2020. Note: as a result of the austerity budget adopted effective September 2020 the Board of
Directors has agreed to forgoing fees for the period through to 28 February 2021.




                                                        Page 7 of 9
                                                                                          Resource Generation Limited
                                                                                 Quarterly Report to 31 December 2020

7.    Financing facilities                                           Total facility                  Amount drawn
      Note: the term “facility’ includes all forms of financing    amount at quarter                 at 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                                                                 64,963                         64,565
7.2   Credit standby arrangements                                                              -                            -
7.3   Other (please specify)                                                                   -                            -
7.4   Total financing facilities                                                      64,963                         64,565

7.5   Unused financing facilities available at quarter end
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.
      The Company has a Facility Agreement under which Noble Resources International Pte Ltd
      has agreed to make available funds of up to US$50.07 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$49.76 million has been drawn
      down at 31 December 2020. The loan is repayable in quarterly instalments over 71 months
      commencing from 28 February 2021 and has an annual interest rate of 10.75% on all funds
      until the Seventh Deed of Amendment Working Capital Facility. The Eighth and Ninth Deed
      of Amendment Working Capital Facility advanced to the Group carries an interest rate of
      16.00% per annum. 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. Noble has indicated
      that even though the repayment date has been extended to 28 February 2021, it is unable
      to provide the Company with access to further working capital under the Facility
      Agreement.


8.    Estimated cash available for future operating activities                                              $A’000
8.1   Net cash from / (used in) operating activities (item 1.9)                                                       (1,569)
8.2   (Payments for exploration & evaluation classified as investing                                                            -
      activities) (item 2.1(d))
8.3   Total relevant outgoings (item 8.1 + item 8.2)                                                                  (1,569)
8.4   Cash and cash equivalents at quarter end (item 4.6)                                                                  678
8.5   Unused finance facilities available at quarter end (item 7.5)                                                        398
8.6   Total available funding (item 8.4 + item 8.5)                                                                     1,076

8.7   Estimated quarters of funding available (item 8.6 divided by
                                                                                                              0.69
      item 8.3)
      Note: if the entity has reported positive relevant outgoings (ie a net cash inflow) in item 8.3, answer item 8.7 as “N/A”.
      Otherwise, a figure for the estimated quarters of funding available must be included in item 8.7.




                                                      Page 8 of 9
                                                                                                      Resource Generation Limited
                                                                                             Quarterly Report to 31 December 2020

    8.8      If item 8.7 is less than 2 quarters, please provide answers to the following questions:
             8.8.1      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, after introducing an austerity budget at the end of October 2020 and placing all Project
             development expenditure on hold other than essential expenditure related to care and
             maintenance at the mine site.
             8.8.2      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:
                        The Company is in the process of sourcing access to additional funds to complete a
                        strategic review of alternate Project development funding opportunities.
             8.8.3      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, subject to the success of the initiative in 8.8.2 above.
             Note: where item 8.7 is less than 2 quarters, all of questions 8.8.1, 8.8.2 and 8.8.3 above must be answered.




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:                 ...........29 January 2021........................................................................


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: 29-01-2021 08:45:00
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