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2016

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ABOUT THIS REPORT

Scan the QR bar code with your smart phone or tablet to download the 2016 Annual Report.

2016

resgen

This report covers the financial and non-financial performance and activities of Resource Generation Limited for the 2016 financial year (1 July 2015 – 30 June 2016). The contents of this report are in line with regulatory obligations and the stated interests of our stakeholders, produced to provide stakeholders with transparent insight into the Company’s strategy.

Resource Generation Limited’s primary listing is on the Australian Stock Exchange (ASX:RES). It has a secondary listing on the Johannesburg Stock Exchange (JSE:RSG) in South Africa, where its assets are based.

The compilation of estimated Coal Resources and Coal Reserves statement was prepared and first disclosed under the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC) Code 2004 Edition. It has not been updated since to comply with the JORC Code 2012 Edition on the basis that the information has not materially changed since it was last reported.

This report was compiled with the Global Reporting Initiative (GRI) and International Integrated Reporting Council (IIRC) guidelines in mind, while the reporting standards of the Public Investment Corporation SOC (PIC), a key shareholder in the Company, were also considered.

Statement of responsibility by DirectorsThe Board, assisted by the Audit Committee, is ultimately responsible for overseeing and ensuring the integrity and completeness of this Annual Integrated Report. The Board applied its collective mind in reviewing the preparation and presentation of this report. Each of the Directors considers that the Annual Integrated Report, taken as a whole, is fair, balanced and understandable and provides the necessary information for shareholders to assess the Company’s strategy, business model and operating performance.

The Annual Integrated Report was approved by the Board and signed on its behalf by:

Denis GatelyChairman5 October 2016

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PAGE 33FINANCIAL REPORT

Corporate profile 2

Business model and the capitals 6

Chairman’s letter 8

Board of Directors and Executive Management 10

Highlights of 2016 13

Chief Executive Officer’s review 14

Operating environment and external considerations 18

Materiality, risk management and internal controls 20

Responsible mining 23

Coal Resources and Coal Reserves 28

Corporate governance 30

Directors’ report 35

Auditor’s independence statement 52

Financials 53

Directors’ declaration 84

Independent Auditor’s report 85

Rand accounts 87

Shareholder information 90

Corporate directory Inside back cover

Contents

Forward-looking statementsThis Integrated Annual Report may contain forward-looking statements. Forward-looking statements can generally be identified by the use of forward-looking words such as, “expect”, “anticipate”, “likely”, “intend”, “should”, “could”, “may”, “predict”, “plan”, “propose”, “will”, “believe”, “forecast”, “estimate”, “target” “outlook”, “guidance” and other similar expressions. You are cautioned not to place undue reliance on forward-looking statements. Any such statements, opinions and estimates in this Report are based on assumptions and contingencies subject to change without notice, as are statements about market and industry trends, projections, guidance and estimates.

Forward-looking statements are provided as a general guide only. The forward-looking statements contained are not indications, guarantees or predictions of future performance and involve known and unknown risks and uncertainties and other factors, many of which are beyond the control of the Company, and may involve significant elements of subjective judgement and assumptions as to future events which may or may not be correct.

There can be no assurance that actual outcomes will not differ materially from these forward-looking statements. The forward-looking statements are based on information currently available to the Company.

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2 Annual Report 2016

Corporate profile

Resource Generation Limited is an emerging ASX and JSE-listed coal producer, 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.

40%The Waterberg accounts for around 40% of the country’s currently known coal resources

FOCUSED DEVELOPMENT OF A SUBSTANTIAL SOUTH AFRICAN COAL DEPOSITResource Generation Limited (Resgen) is an emerging coal producer with access to a large defined coal resource in the Waterberg region of South Africa and an execution plan to develop the Boikarabelo project into an operational mine.

The Boikarabelo Coal Mine (Boikarabelo) is owned by Resgen’s operating subsidiary, Ledjadja Coal (Pty) Ltd, a South African company that is fully Broad-Based Black Economic Empowerment (BBBEE) compliant.

There are Coal Reserves of 744.8 million tonnes* on 35% of the tenements under the Company’s control. The construction of the mine is expected to commence as soon as the project finance is secured, with first production of saleable coal planned for the first quarter of 2019.

* Refer to page 29

The Boikarabelo tenements are 40 kilometres by road from an existing rail system that will allow access to domestic markets and the ports of Maputo, Richards Bay and Durban for export shipments.

The outcomes arising from the reports of a Technical Committee appointed by the Board have led to a new execution strategy that will reduce the capital cost of the project and reduce risk through the appointment of established engineering, procurement and construction (EPC) contractors with good track records and substantial balance sheets.

A new mining plan has been developed that will maximise recovery of the coal deposit by mining all seams and minimise out-of-pit dumping of waste, resulting in increased productivity and reduced operating costs.

Organisational structure

Resource Generation Limited

ResgenMauritius Ltd

100%

ResgenAfrica Holdings Ltd

ResgenSouth Africa (Pty) Ltd

100%

100%

Waterberg OneCoal (Pty) Ltd

74%

LedjadjaCoal (Pty) Ltd

74%

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Corporate profile



ResgenMauritius Ltd

100%



100%

100%


74%


74%



ResgenMauritius Ltd

100%



100%

100%


74%


74%

Shareholders approved a change of the Board on 26 November 2015. As a result, the executive management function was transferred to South Africa and a new Chief Executive Officer (CEO), Chief Financial Officer (CFO) and Chief Operating Officer (COO) were appointed. See page 11 for their biographies.

“R5.52 billion committed to complete construction of Boikarabelo – credit approvals and financial close targeted for end March 2017.”

All about Boikarabelo

The opencast Boikarabelo Coal Mine in South Africa’s highly prospective Waterberg region has a Coal Resource of 6.4 billion tonnes, with an estimated life of mine of 200 years. Boikarabelo – which means ‘to be responsible’ in the local language – will be a world-class, low-cost, open-cut coal mine with a mining right extending over approximately 11 000 hectares. See page 28.

Responsible Coal

Resgen aligns itself with ethical, social and environmental principles which serve to guide our practices so that they do not infringe on human rights and the environment in a harmful way. See page 23.

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Corporate profile continued

NAMIBIA BOTSWANA

REPUBLIC OF SOUTH AFRICA

Richards Bay

Durban

Maputo

Walvis Bay

RICHARDS BAY TERMINAL GRINDROD (RBTG)Design capacity of 4.5 Mtpa

Capacity planned to be increased to 10 Mtpa thereafter up to 20 Mtpa

RICHARDS BAY COAL TERMINAL (RBCT)Design capacity of 91 Mtpa

Potential for capacity expansion to 110 Mtpa

WaterbergCoalfield

5km 30km

Rail infrastructure

LEGEND

Existing rail infrastructure allows for access to major parts

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Botswana

BOIKARABELOMINE

5km 30km

Matimba

Marapong

Medupi

Exxaromine

Lephalale

Limpopo River

Land purchased

Prospecting rights

Mining right but not land ownership

Land owned but not exploration rights

Land owned for rail

Servitudes

Property boundary

Planned pipeline

Planned rail

Rail link

Access road

Power station

Marapong effluent plant

Mine infrastructure

LEGEND

NAMIBIA BOTSWANA

REPUBLIC OF SOUTH AFRICA

Richards Bay

Durban

Maputo

Walvis Bay

Corporate profile

The Waterberg coal field

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Business model and the capitals

FINANCIAL CAPITAL

Through equity provided by shareholders, the Company has been able to develop the project to feasibility stage as well as begin partial development. Funding has been used as working capital to drive the daily operations.

In order to complete construction, Resgen has engaged with a ‘debt club’ to provide the remaining required funds through a combination of debt instruments.

HUMAN CAPITAL

Resgen’s skills base incorporates operational, financial, commercial, technical, environmental, social, safety and human resources. With collective knowledge of over 120 years in mining, the team is well suited to take the project through to production. See pages 10 to 12.

INTELLECTUAL CAPITAL

Experience and innovation drive the project. Through careful review of methodologies from around the world, Resgen is able to take the best, and most appropriate, ideas, mining methods and technologies and apply them to create a project galvanised by high productivity and low cost.

The new mine plan combines efficient mining methods with economic management of fleets and in-pit dumping.

NATURAL CAPITAL

Resgen has secured 11 farms, spanning 11 000 hectares and all servitudes are secured. The large, well-defined Coal Resources have been explored and evaluated. The Company has mining rights for a resource of 1.58 billion tonnes. See page 28.

Access to water is an important requirement in an area that is water stressed. There is sufficient water for the project. See page 26.

MANUFACTURED CAPITAL

Boikarabelo’s infrastructure requirements are vast and extend from roads, to rail, to bridges, to buildings, to plants and to fleets (large and small).

Fast, accurate technology and carefully engineered equipment is essential to delivering efficiently and cost effectively.

SOCIAL AND RELATIONSHIP CAPITAL

Engagement with local government, business, communities, non-governmental organisations (NGOs) and individuals is an important part of our project to ensure beneficial and harmonious relationships exist. See page 24.

CAPITALS AND KEY INPUTS

PRODUCTIONROADMAP TO

2014 NOVEMBER• 400-man camp and services for

1 320-man camp in place

2015 DECEMBER• Site construction, power and water

2016 JANUARY• Technical Committee review project to

reduce cost and risk

2016 MARCH• CHPP alternate proposal submitted

2016 MAY• Low-risk execution strategy and new

mining plan adopted

2016 JUNE• Credit funding approved• Sedgman Limited appointed for design

and construction of coal handling and preparation plant

2016 JULY• Commercial terms for debt funding agreed

2016 AUGUST• Commercial terms for full funding for

construction of Boikarabelo agreed

2016 DECEMBER• Debt funding – Credit Committee approval

2017 MARCH• Debt funding and drawdown

2017 APRIL• Mobilisation of EPC contractors

2019 MARCH• Production of first coal

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Business model and the capitals

FINANCIAL CAPITAL

• R462 million income tax to be paid per annum

• R165 million in royalties to be paid per annum

• R250 million estimated flow into local economy per annum

HUMAN CAPITAL

• The project will create 3 000 jobs during construction and approximately 700 permanent jobs (50% women)

• A safe workplace that promotes employee health and wellbeing

INTELLECTUAL CAPITAL

• Ongoing investment in skills development and technical studies

• A unique approach to mining in South Africa

NATURAL CAPITAL

• New generation coal mining to minimise environmental footprint

• In-pit waste dumping to reduce impact

• Mining plan to maximise yield, maximise recovery of the deposit by mining all seams and achieve 6Mtpa of clean coal production

MANUFACTURED CAPITAL

• Development consent secured

• Site construction partially complete

• 400-man camp and services for 1 320-man camp in place

• Power supply secured

• Access to Richards Bay

SOCIAL AND RELATIONSHIP CAPITAL

• Diverse workforce

• Good relationships with employees

• Early and continuous engagement with local communities

• Progressive Social and Labour Plan (SLP) in place

• Strong support from government departments and state-owned enterprises

• Equity investment from PIC

clean coal production at full production

KEY OUTCOMES

PRIMARY OUTPUT

6Mtpa

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“The year’s activities have been undertaken against a background which has seen the price for thermal coal firm – and in some markets, rise – at both export and domestic levels. In a further positive move, forecasts suggest that the current price trend will continue and our first production will coincide with a period of increasing prices.”

Denis GatelyChairman

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Chairman’s letter

Chairman’s letter

DEAR SHAREHOLDERSOn behalf of the Board, I am pleased to present the annual report of our Company for the year ending 30 June 2016. The year under review has been a significant and positive one for the Company, with fundamental changes of Board and management and of development strategy mid-way through the year.

Immediately following its appointment at the EGM of 26 November 2015, the new Board’s priority was to take stock and to review development and mining strategies, and the associated financing options, for the proposed Boikarabelo Mine. At the time, based on public statements, it was assumed that the project was ‘shovel-ready’ and awaiting funding. However, the review revealed many technical and development strategy shortcomings. These have been addressed and the project is indeed now ready for development, subject to financial close of debt funding.

We determined to follow a low-risk development strategy and will therefore adopt an engineering procurement and construction (EPC) development model and a contract mining operating model. Instead of bulk extraction, we will adopt more contemporary ways of doing things and consequently implement selective seam extraction with concurrent backfilling. The impact is lower operating costs, more efficient capital expenditure and a much improved progressive rehabilitation profile.

Our preferred timeline is to commence development of the mine by early 2017, with first production planned for the first quarter of 2019.

The end result will, we believe, deliver the project at a substantially reduced capital cost – and enable it to be operated at very competitive cost levels.

The Company’s prime focus has been shifted to South Africa. The project team is centered on the Company’s Pretoria office, and since December 2015 Board meetings have for the first time been held in South Africa. This has enhanced our engagement with local stakeholders, from government to service providers to local communities.

The Board believes that this shift in focus was critical to the Company’s prospects. Not only is the Company’s sole asset located in South Africa, but its Boikarabelo project development is consistent with the stated objective of the government of South Africa’s National Development Plan 2030 (“to open up the Waterberg for coal mining”) and it is also the first ranked Strategic Infrastructure Project under the South African National Infrastructure Plan (“unlocking the northern mineral belt with Waterberg as the catalyst”). Our shareholders’ interests are clearly aligned with those of South Africa.

At management level, we appointed Rob Lowe as our CEO with effect from 1 January 2016. Mr Lowe is based in the Company’s office in Pretoria and visits the mine frequently. Brendan O’Regan who had been the Company’s financial controller was appointed CFO in April 2016. Following an external recruitment process, we appointed Zirk van der Bank as our COO, with effect from 1 July 2016 – a critical appointment, given the imminent development planned for the Company. Mr van der Bank will be based on site to take direct responsibility for all development activities

These activities by your new Board and management have been undertaken against a background which has seen the price for thermal coal firm – and in some markets, rise – at both export and domestic levels. In a further positive move, forecasts suggest that the current price trend will continue and our first production should coincide with a period of increasing prices.

There have also been significant positive developments since year end, with a heads of agreement being reached with Sedgman for the construction of the coal handling and preparation plant and ancillary works package, as well as for an operating contract after commissioning. A preferred contract miner has been selected and final negotiations are underway. Finally, commercial terms have been agreed with project financiers.

Your Board has made a concerted effort to keep shareholders informed of developments – supplementing required stock exchange releases with informal Chairman’s updates following Board meetings.

In closing, I would like to extend thanks and appreciation for the considerable effort and diligence applied by management and my Board colleagues in coming to grips so quickly with the challenges presented by the development of Boikarabelo, and for the professionalism and collaborative approach they displayed in meeting those challenges. I am confident I speak on behalf of all shareholders in expressing those sentiments.

Yours sincerely

Denis GatelyChairman

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Denis GatelyNon-executive Chairman

Senior energy and resources lawyer; extensive experience in the international energy and resources industries and as a non-executive director of several listed and unlisted Australian companies and off-shore businesses; including Gloucester Coal Ltd, Alligator Energy Ltd (chair), Xanadu Mines Ltd (chair) and Murphy Pipe and Civil (chair).

Lulamile XateNon-executive Deputy Chairman

Completed articles at PricewaterhouseCoopers; extensive business experience, having developed several successful businesses in the fishing, gas and forestry industries; founding member and director of BBBEE Level 1 company Altius Investment Holdings (Pty) Limited (Altius).

Colin GilliganNon-executive Director

Mining engineer with extensive experience of contract mining and project construction; 30 years as general manager and COO of coal mining companies; as COO of Coalspur Mines Ltd, was a key participant in raising a US$350 million debt facility.

Dr Konji SebatiNon-executive Director

Medical practitioner and CEO of national pharmaceutical association IPASA; practiced in the public sector, specialising in rural child health; joined the private sector and served in senior positions in South Africa and USA with Roche and Pfizer; appointed South African Ambassador to Switzerland in 2004 and Ambassador to France in 2008.

Rob CrollNon-executive Director

Mining engineer with 40 years’ experience; served in senior management positions in De Beers Consolidated Mines Ltd and Anglo American Corporation of South Africa Ltd; played a major role in managing the due diligence process for acquisitions for AngloGold Ashanti.

Leapeetswe Rapula Radiala (Papi) MolotsaneNon-executive Director

Distinguished business career, having served as board member and CEO of Telkom; served as group executive of Transnet and CEO of Fedics; currently joint CEO of his own business consultancy.

Board of Directors and Executive Management

BOARD OF DIRECTORS

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Board of Directors and Executive Management

Hennie van der Ardweg

General Manager

Mining and electrical engineer with 30 years’ experience,

mostly in South African underground and open-cut coal mines;

previously with Total, Duiker; very good understanding of South

African coal geology, mining and beneficiation.

Bongi Ndimande

Human Resources Manager

Twelve years’ experience in the coal industry; previously a human

resources manager for Sasol; extensive South African social,

labour and industrial relations experience; broad capabilities to

address recruitment, training and community issues.

Johnny Prinsloo

Engineering Manager

Engineer with 25 years’ experience in the coal industry;

previously with Ingwe and Total; experience in open-cut and

underground mining, mine development, covering mining and

beneficiation activities.

Rob LoweChief Executive Officer

Legal and corporate finance background; founding member and Chief Executive Officer of Altius, a BBBEE level 1 investment company focused on food, energy and water; Executive Chairman of NuWater, a leading provider of mobile and modular water cleansing solutions to the mining, power and gas, sanitation and public sectors.

Brendan O’ReganChief Financial Officer

Chartered Accountant with 29 years’ experience in the profession and with mining companies in Australia and South Africa; joined Resgen in 2011.

Zirk van der BankChief Operating Officer

Mining Engineer with more than 20 years’ experience in coal mining; held a range of supervisory and management positions at Sasol Mining, Moolman Mining, Shanduka Coal and Glencore Coal SA.

EXECUTIVE MANAGEMENT

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Ettienne FerreiraFinancial Manager

Finance, tax and systems expert; 15 years’ senior-level experience in coal mining.

Luyanda PoswaFinancial Manager

Chartered Accountant having completed articles with PricewaterhouseCoopers and with advanced accounting skills in terms of the International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS). Served in management roles with Shell and Engen.

Billy JamesCommercial Manager

Strong background in technology and corporate finance; formerly Senior Vice President for Mergers & Acquisitions at Altius, where he was responsible for projects in the energy, resource and disruptive technology sectors.

Sechaba SelibeRisk and Compliance Manager

Chemical Engineer with post graduate MBA and worked as a metallurgist and marketing manager with BHP Billiton; Vice President at Noble Group responsible for origination and trading; sole proprietor of his own trading business.

Louise NicolaïEnvironmental Officer

MSc in environmental management and 10 years’ experience in environmental management in Africa; experience encompasses the legislative process for greenfield projects, environmental monitoring, environmental management systems development and auditing; committed to a culture of environmental excellence.

Board of Directors and Management continued

EXECUTIVE MANAGEMENT continued

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HIGHLIGHTS OF 2016

Commercial terms for debt funding agreed – R5.52 billion commitment secured to complete construction of Boikarabelo – credit approval and financial close targeted for end March 2017.

Independent technical experts, completed initial reports – outcomes favourable to the newly adopted execution strategy and mining plan.

Most assumptions in the base case financial model now verified with the appointment of the EPC contractors and agreement with TFR.

Partnership with the Road Agency in Limpopo signed to upgrade the road from the Lephalale commercial sector to Steenbokpan and all connector roads to the Boikarabelo site.

Heads of agreement concluded for design, procurement and construction of the coal handling and preparation plant for Boikarabelo.

Low-risk execution strategy in place – limited number of EPC contractors with good track records and strong balance sheets appointed.

Concept feasibility study for a 300 MW coal-fired power station received and reviewed.

Review of key policies and procedures completed.

Commercial Terms concluded for the appointment of the mining contractor.

Base case financial model completed – project deemed fundable without further equity from shareholders.

Negotiations with Transnet Freight Rail concerning the tariff and access to coal terminals at Richards Bay concluded. Negotiations concerning adoption and construction of the rail link underway.

Ancillary works programme scoped and budgeted.

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“With the support of the new Board I am determined from the outset that our primary objectives would be to undertake a review of the merits of the project, reduce its capital cost in order to align the project with its debt capacity and to secure funding to complete construction before the end of the first quarter of 2019.”


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Chief Executive Officer’s review


Construction contract

saving of

US$200 million

Resgen has submitted its

SLP to the DMR

Financial close targeted for

March 2017

DEAR STAKEHOLDERSI write this report – my first as the new CEO of Resgen – after a very busy and productive six months. I was appointed interim CEO in November 2015 and CEO in January 2016 and during this short time much has happened. Resgen is now a Company well on the road to bringing Boikarabelo into production.

When I assumed office, the Company had been placed by the previous management in austerity mode and had gone through a prolonged period of uncertainty leading up to the EGM. As a result, there was limited vision for the future and staff morale was understandably low. With the support of the new Board I determined from the outset that our primary objectives would be to undertake a review of the merits of the project, reduce its capital cost in order to align the project with its debt capacity and to secure funding to complete construction before the end of the first quarter of 2019.

A renewed sense of energy and direction has been introduced into the Company. During the last six months of the year under review the following milestones have been achieved:

Boikarabelo (the Project)• A technical committee, comprising external and internal

individuals, was appointed with a mandate to review the Project, identify cost savings and reduce risk to the Company.

• The ‘debt club’ of lenders was revived and other sources of funding were actively pursued and reviewed.

• A thorough review of policies and procedures was initiated and, where necessary, new policies, particularly with regard to risk management, were introduced.

• Following recommendations from the technical committee, a new execution strategy and a mining plan for the Project were adopted. The execution strategy is designed to reduce both risk to the Company and the capital cost of the Project by the appointment of a limited number of EPC contractors. These contractors have proven track records and strong balance sheets. Resgen will have right of recourse in the event of failure or delay.

The mining plan is designed to increase productivity through selective mining, reduce operating costs and minimise the environmental impact through in-pit waste dumping.

• As a first step towards the implementation of the new execution strategy the Company signed a Heads of Agreement with Sedgman Limited for the design and construction of the coal handling and preparation plant in June 2016. The proposed contract with Sedgman is for a fixed price lump sum of US$141 million. This represents a saving from the previously indicated figure of US$200 million with FLSmidth.

• A Request for Proposal was issued to leading South African contract miners in June 2016 and the appointment of Stefanutti-Stocks Mining, was made subsequent to year end. The Company was able to negotiate competitive terms with the selected contract miner taking full advantage of the current economic climate and shortage of work within the mining industry.

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Chief Executive Officer’s review continued

In parallel with this, the Company is engaging with prospective IPP partners and EPC contractors and a Memorandum of Agreement with the chosen parties will be concluded as soon as possible.

TransformationTransformation of the South African economy, by which historically disadvantaged citizens are actively encouraged to participate in economic development, plays a vital role in the Company’s compliance with the Mining Charter Score Card (MCSC) and in meeting the expectations of our shareholders and funders – not least the PIC and IDC. The PIC has adopted the MCSC as a measure by which to adjudicate listed companies in which it has invested or funded.

Resgen takes its transformation responsibilities seriously and is taking all necessary steps in order to ensure compliance, including:

• Submitting a new Social Labour Plan (SLP) to the Department of Mineral Resources (DMR)

• Implementing in part or in full a number of initiatives itemised in the SLP including:

• Human Resource Development

• Adult Education and Training (AET)

• adult learnerships

• a bursary programme

• internship programmes

• skills pool training to members of the community

• Local economic development

• spatial development framework plan for project housing

• upgrade of waste water treatment plant for local community

• Corporate social investment

• rapid health impact assessment

• upgrade of local school after fire damage

• appointing two historically disadvantaged candidates to senior management positions: Risk Manager and Financial Manager

• developing an excellent working relationship with our BBBEE partner, Fairy Wing Trading 136 (Pty) Ltd (FWT) including:

• the appointment of a FWT representative to the Company’s Funding Committee

• the appointment of a FWT representative to the Company’s Technical Committee

• regular update meetings with all FWT shareholders and their representatives

• Negotiations with the ’debt club’ have proceeded well. In February the Company appointed Rand Merchant Bank (RMB) as lead arranger and funder. RMB completed a base case financial model (BCFM) using conservative coal prices in May 2016 and advised the Company that, based on the information provided, the project was fundable without recourse to shareholders for further equity.

• Independent technical experts, appointed by RMB, have submitted interim reports substantiating all of the key assumptions in the BCFM, the mining model and execution strategy.

• Although concluded post the year end, it is important to note that on 8 August 2016 the Company, through its operating subsidiary, Ledjadja Coal, agreed commercial terms for the full funding for construction of the project with the following members of the debt club: RMB, Noble, PIC and Industrial Development Corporation (IDC).

• Financial close is targeted for the end of March 2017, allowing first mobilisation of the EPC contractors and the start of full construction in the second quarter of 2017. The estimated time to complete construction and the first production of coal is the first quarter of 2019.

• Negotiations with Transnet Freight Rail have concluded with an agreement for a viable developmental tariff from the mine to Richards Bay and access to port facilities at Richards Bay. This will be considerably more economical than the previous export option through Durban.

• Resgen’s team has been strengthened through the appointment of Zirk van der Bank, an experienced mining engineer with large project experience, as COO.

The mine staff have been engaged in care and maintenance activities and on preparing the site for first mobilisation of the EPC contractors in the second quarter of 2017.

Independent Power Plant (IPP)The Board has decided to use the Company as a platform to pursue additional energy opportunities over and above its focus on Boikarabelo. In pursuance of this objective, a desktop feasibility study was commissioned in February 2016 and findings were received in May 2016. An IPP would be financially beneficial to both the project and the owners of the IPP. The study also concluded that the optimal size for an IPP is between 450MW and 600MW. Accordingly, Resgen is now actively undertaking investigations to determine time lines to upgrade its existing permits for a 260MW plant in time to participate in the Department of Energy’s 2017 RFP for baseload coal powered power stations.

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The Company is developing an action plan to achieve full compliance with the MCSC. The Company has now established a Social, Ethics and Transformation Committee as set out on page 32.

Beyond complianceI am also pleased to advise stakeholders that we are serious about our commitments in the social, ethical, and environmental arena – we aim to be a responsible coal producer. We provide upliftment for employees and communities in terms of training, socio-economic development and employment. Resgen is a transparent, modern and fair employer with due respect paid to human rights. Boikarabelo is designed for optimal beneficiation and only the best practice environmental standards will be followed.

ConclusionI am happy to report on the progress made in 2016 to improve the technical merits of the project and to secure the funding necessary to complete construction of the project. The alignment of the project with South Africa’s developmental goals has resulted in positive support for the project from South African stakeholders including PIC, IDC and TFR.

Collectively these stakeholders have worked with the Company in order to drive the Government’s Strategic Infrastructure Project (SIP1):

“Unlocking the northern mineral belt using the Waterberg as a catalyst.”

Morale within the Company has steadily improved and all staff members are focused on finalising the funding as soon as possible and on attaining project-ready status by the first quarter 2017.

I am confident that the Project will now proceed into final construction and that the Company is protected to the best extent possible from any delay and other execution risks during the construction phase.

In closing, I am grateful for the overwhelming support that I have received from the Board, from my colleagues, and from shareholders – including PIC and Noble as well as the individual shareholders who have written to me during the year.


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Resgen has identified key influences on the global environment in which it operates. A thorough analysis of the operating environment guides Resgen’s current activities and shapes future strategies.

THE GLOBAL ECONOMYThe global economy is in a period of fundamental change. The

living standards of people in countries with emerging economies,

particularly those in Asia, are improving, creating ever-rising

demand for energy, commodities and food. Although this

improvement in living standards is creating demand, supply side

developments, such as the rise of shale gas production in the

United States, have led to downward pressure on the prices of

energy minerals, particularly of oil and natural gas. A positive

outcome has been that these weaker commodity prices have

restrained the inflationary pressures that might otherwise have

been expected.

China, which has been an important driver in growth in demand

for commodities, is entering a period of slower economic growth

as its economy is gradually being shifted towards consumer-

led growth with less proportional emphasis on infrastructural spending. In the process, inefficient Chinese mines are being taken out of operation with their production of bulk commodities such as coal and iron ore being replaced by cheaper and more efficient imports.

China’s emergence as an economic power-house has been accompanied by significant increases in pollution, and this is now being addressed, although not at the expense of traditional reliance on coal and hydrocarbons. The approach is to ensure that emissions from the burning of fossil fuels are contained.

ENERGY MARKETS AND THERMAL COALIn a recent analysis of the world’s energy future, the International Energy Agency (IEA) stressed the imperative of addressing energy poverty in developing countries. The Agency also emphasised that pollutant emissions would, simultaneously,

Our operating environment – external considerations

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Our operating environment – external considerations

need to be reduced using post-combustion technologies and the use of renewables. The IEA makes the point that emission-control technologies are already widely available, a fact that would point to the continued use of fossil fuels such as coal for power generation.

Recent projections by the US Energy Information Administration (EIA) indicate that by the year 2040 global energy consumption will be 48% greater than in 2012 and that fossil fuels – oil, gas and coal – will be providing three-quarters of the world’s needs by 2040. Though fossil fuels will deliver a slightly lower proportion of the energy mix than at present, it indicates that the world will continue to rely predominantly on fossil sources for its energy. The EIA’s analysis projects thermal coal growth to rise by an annual 0.6% over the period – slightly lower than the growth rates for gas and oil – supported by the size of the existing fleet of coal-fired power stations and additions to this well-proven technology.

Internationally traded energy coal prices have been under pressure for the past few years and could remain so in the immediate term.

POLITICAL CLIMATEDemocratic South Africa is among the most stable of the African continent’s nations, as was underscored yet again by the local elections of 3 August 2016. This is the first time that real democracy has been put to the test, and South Africa appears to have passed maturely and peacefully.

LOCAL LEGISLATIONSouth Africa’s mining legislation is founded on three pillars: economic empowerment aimed at facilitating the increased participation of the country’s majority black population in the mining sector; protecting the environment and ensuring fair access to water in a country classified as semi-arid and; encouraging the local beneficiation of the country’s minerals.

Against this background, South African legislation is in line with that of similar countries and is aimed at providing clarity on what is permissible. It is neither oppressive nor overly permissive and its application may be and, on occasion, has been challenged through the courts.

Permitting of exploration and of new mines is largely handled by the Department of Mineral Resources (DMR) and by the Department of Water Affairs and Forestry (DWA). These two departments are tasked with implementing the rules of the Minerals and Petroleum Development Act (MPRDA) which is, itself, in the process of being amended. Amendments to the Act are being evaluated by parliament and have provoked some concern among the mining industry over proposals to grant additional powers and discretion to the Minister of Mineral Resources. Amongst other things, in terms of the Amendment Bill, the Minister would be empowered to designate specific

minerals considered strategic and whose sales may be reserved for domestic use or beneficiation.

The DWA is responsible for ensuring that mining companies and local communities have fair and reasonable access to water, and will only grant water access to mines that comply with its provisions. Local officials of the DWA oversee the process and their decisions may differ from region to region.

Proposed amendments to the MPRDA include rules on local beneficiation of minerals.

ENVIRONMENTAL CONSIDERATIONSMining companies are subject to stringent legislation and regulations with regard to the impact of their activities on local communities and the surrounding environment. Given that large parts of South Africa are semi-arid, water is a precious resource. Apart from the Orange River which flows to the Atlantic through the centre of the country and the Limpopo River on its northern frontier and which drains into the Indian Ocean, South Africa has no major river systems. And while rainfall is comparatively heavy along the country’s east coast, it can be sparse in the central and western parts. This means that water has to be carefully managed and allocated.

The country has only negligible proven resources of oil and gas and is dependent on coal-fired thermal power stations for the bulk of its electricity, which contributes to placing the country in the middle of the per capita ranks of emitters of carbon dioxide, although well down in the ranks of total national emissions, even below Australia measured in terms of total and per-capita emissions*.

Ahead of the 2015 Paris Agreement on climate change, South Africa presented an Intended National Determined Contribution or INDC which targets a peaking of greenhouse gas emissions between 2020 and 2025, a plateauing of 10 years and a subsequent reduction.

Resgen and the Project are fully compliant with all environmental, employment, empowerment and social regulations – see pages 23 to 25.

* According to the authoritative European Commission and Netherlands Environmental Assessment Agency (EDGAR).F

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Materiality, risk management and internal controls

The Board of Resgen holds ultimate responsibility for risk oversight and risk management for the Company. The Company’s ability to identify, manage and mitigate risk, and to take advantage of opportunities is critical to its success.

The Risk Management Committee is responsible for:

• leading the Company’s strategic direction in the management of material business risk;

• overseeing the establishment and implementation of a risk management framework; and

• reviewing the effectiveness of the risk management framework in identifying and managing risks and controlling internal processes.

The Risk Management Committee meets four times a financial year at appropriate times and additional meetings are held as required. The day-to-day identification and management of risks is handled by the Risk Officer (RO), who reports to the Board through the Risk Management Committee.

The Committee has established a risk management framework,

which outlines the processes of identifying, evaluating and

managing the risks facing the Company. Risk assessment and

risk management is inherently about managing unplanned

events and identified exposures. Unplanned events can occur

internally within our operation or externally in the surrounding

environment or community. They have the potential to impact

negatively on the community and/or the viability of Boikarabelo.

The process of assessing and managing these risks is aimed

at reducing the likelihood that they will occur and increasing

the likelihood that, rather, positive outcomes (opportunities)

will be realised. The Board regularly reviews the key risks and

control measures.

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Materiality, risk management and internal controls

Resgen’s Risk Management Framework outlines processes by which the Company seeks to achieve industry good practice, procedures for conducting its corporate activities, mine development and future mining operations. It is Resgen’s intention to:

• achieve Zero Harm with regard to safety and health of our employees, our contractors and the environment in which we operate;

• have the essential skilled personnel and to use the organisational structure efficiently in order to meet our strategic plan;

• attract, develop and retain the best people with management, operational, technical and business skills;

• maintain a healthy industrial relationship between the Company and employees;

• efficiently manage the Company’s mineral resource base and to maximise shareholder value;

• endeavour to be a low-cost mining operation within the industry;

• protect and maintain the security and reliability of the Company’s physical assets;

• retain our ‘licence to operate’ by being compliant with all regulatory requirements;

• ensure that we minimise risks of disruptions in supply and logistics for the Company;

• manage, through appropriate policies, the impact of HIV and AIDS on employees; and

• be a responsible corporate citizen.

In order to continuously achieve these goals, the responsibility of the Risk Management Committee is therefore to:

• advise the Board, in conjunction with the Audit Committee, on the Company’s overall risk appetite, tolerance and the

risk limits that should be applied in the various sectors of the Company’s activities;

• review the risk identification and management processes developed by management to confirm it is consistent with the Company’s strategy and business plan;

• review the Company’s overall risk assessment process (including risk registers) to ensure both qualitative and quantitative metrics are used;

• assess the steps management has implemented to manage, avoid, minimise or mitigate identifiable risks;

• review reports on any material breaches of risk limits and the adequacy of proposed action;

• review the adequacy and security of the Company’s arrangements for its employees and contractors to raise concerns, in confidence, about possible wrongdoing in financial reporting or other matters;

• review the Company’s procedures for detecting fraud;

• review the Company’s procedures for prevention of bribery and corruption;

• recommend to the Board the appointment of a Chief Risk Officer (CRO);

• direct the RO to ensure that appropriate and regular reports are provided to the Committee pending the appointment of the CRO;

• review promptly any reports on the Company by the RO;

• liaise as appropriate with other Board committees and in particular with the Audit Committee and the Safety, Health and Environment Committee (once formed);

• periodically review its own performance and, at least annually, review its composition and charter to ensure it is operating effectively and efficiently and, to recommend any changes it considers necessary to the Board; and

• review as appropriate any Company policy which has implications in regard to risk.

IDENTIFIES EVALUATES MANAGES

Resgen’s risk management framework:

Internal and external risks and opportunities

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Materiality, risk management and internal controls continued

KEY RISKSEight key strategic risks have been identified by management with risk mitigation plans in place or under development.

1 2 3Timely completion of credit approved project finance on commercial terms

Effective project execution with an experienced team so that the mine is developed within scope, schedule and budget

Effective management of our ‘licence to operate’ at Boikarabelo through sound environmental management and engagement with employees, the surrounding community and other stakeholders

4 5 6Compliance with mining right requirements and regulations (including social and employment programmes) in order to retain the rights of tenure in good standing

Embedding an effective health and safety culture and management systems for both employees and contractors

Securing timely and economically sustainable access to coal supply chain infrastructure

7 8Monitoring and engagement with Government in order to minimise detrimental changes to legislation and regulation of the mining industry

Effective procurement and contractor management processes in order to minimise the risk of bribery and corruption and ensure aligned contractual performance

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Responsible mining

Responsible mining means that we focus on more than just compliance. We focus on the issues that affect the environment, employees and communities so that we can make a meaningful, sustainable and positive impact.

As a Company, we have a responsibility to minimise our carbon footprint, use natural resources efficiently and ensure our employees’ needs are taken into consideration, and to make a social and economic difference in the Lephalale area and surrounding communities. We believe that these commitments to our employees, their communities and the natural resources we rely on, will ultimately translate into value for all our stakeholders.

Companies have been mining in South Africa for many years now. We have models to follow, and we have learned from mistakes. Our approach is underpinned by the following fundamental values:

• Zero Harm – safe mining above all else

• Equality and diversity – ensuring equal opportunities for both men and women working at our operations

• Low environmental impact mining – managing and reducing any harmful effects on the Waterberg region

• Supporting the local economy – sourcing services from local communities

• Taking responsibility – being accountable for our actions, both at our operations and in our community.

Our SLPs continue to serve as a blueprint for our community and local economic development. F

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Responsible mining continued

Boikarabelo is likely to create some 3 000 jobs during its construction phase. In the operational phase this number is likely to decline significantly, although local communities will be considered for approximately 700 jobs at the time.

In preparation for providing an appropriate and dynamic human resource function in a harmonious industrial relations climate to a fully-fledged colliery and its business we have put the steps in place for intensive community engagement and recruiting from the local community in order to achieve a workforce which is diverse, stable and productive.

Community engagement processes during the year extended to local traditional leaders, engagement with eight surrounding Lephalale communities and the local Lephalale municipal authorities.

In support of local recruitment we have conducted an extensive skills audit within the community in which we operate. We now have a database of 12 000 curricula vitae, with representatives from surrounding villages, informal settlements and townships.

Achievements during the year:

• 68 students enrolled on the AET programme

• 14 learners are enrolled in the learnership programme

• Six bursars studying with the help of bursary support

Regular meetings are held with local communities in order to share information about developments and employment opportunities at the mine and any concerns that people have. Community interventions are focused primarily on education and local infrastructural development, in line with the mine’s SLPs.

Stimulation of economic development is a critical SLP area. Where possible we source supplies and services from local businesses. Workshops are held for business owners and more than 250 small, medium and micro enterprises (SMMEs) are registered on Boikarabelo’s electronic supplier database.

HUMAN RESOURCES

COMMUNITY DEVELOPMENT

250SMMEsare registered onBoikarabelo’s supplier database

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Responsible mining

In spite of only limited activity at the Boikarabelo site ahead of the start of construction, safety systems and procedures have been designed taking account of best practice, and in line with South African health and safety regulations.

Employee wellbeing is paramount at Resgen and we strive to achieve a working environment that is free of occupational injury and illness. We stress the notion of Zero Harm, and have implemented a safety management system which is aligned with and complements the internationally recognised OHSAS 18001 management standard.

Safety management systemWe recognise that safety training and competencies are critical elements of the safety management system which seeks to ensure the proper selection, training and competence of employees. The aim is for transparent reporting focusing, amongst others, on:

• near miss reporting;

• high-potential incident reporting;

• incident/accident reporting and investigation;

• good communications practices and opportunities within the project and to the authorities;

• inspections and audits;

• safety observations linked to KPIs; and

• risk assessments and development of safe working procedures.

Zero Harm safety cultureOur safety culture focuses on promoting responsibility (Boikarabelo) and accountability for safety from an individual to fellow employees. Safety is a Company-wide responsibility. A system is in place to investigate and report all incidents, with the focus on preventing recurrence.

Visible leadershipOur Zero Harm safety culture also relies on a healthy management/worker relationship. This will be demonstrated on site by senior management scheduled site visits and visibility. The aim is to display leadership and to illustrate that every single individual is subject to the same safety rules and procedures.

Hazard identification and risk mitigation We recognise and acknowledge that our construction and mining activities present vastly different hazards and risks, ranging from high- to low-risk environments. It is therefore important that we realise, anticipate and appropriately address and mitigate all risks through, but not limited to:

• baseline risk assessment;

• issue-based risk assessment; and

• continuous risk assessments.

HealthIn these early days, pre start-up, management is putting the steps in place to ensure a fit and healthy workforce. A third-party specialist and accredited occupational hygienist Company has been contracted to implement medical surveillance and monitoring services. The focus is on occupational illnesses and exposure and extends to monitoring for noise, airborne pollutants and thermal stress surveys. The results are then reported to the DMR on a quarterly basis.

In terms of primary healthcare, services are provided for full-time employees and contractors. The service extends to quarterly HIV, AIDS and pulmonary tuberculosis testing on the one hand, and family planning advisory services on the other.

SAFETY AND HEALTH

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Boikarabelo covers 11 000 hectares, which is home to a

diverse array of flora and fauna species. The Company has

implemented an environmental management plan (EMP)

which emanates from the results of the environmental

impact assessment (EIA) concluded as part of the public

participation process during the early phases of the Project.

The mine is fully permitted and licensed.

Resgen aims to develop a leading coal mine which co-exists

with the surrounding natural environment by minimising

potentially adverse impacts, whilst enhancing the positive

impacts throughout the life of mine. By applying appropriate

mitigation and rehabilitation, we intend to achieve post-

mining land use.

Already, at these early stages, infrastructure consolidation

and early pit backfilling will contribute to a reduction in the

area of disturbance. Surrounding habitats and fauna are

included in our environmental management system. Areas

of non-disturbance are seen as opportunities to implement

programmes to improve the surrounding natural veld.

Water managementWater management was a key concern in the planning

phases of Boikarabelo, given the water scarcity in the area.

The mine is planned to be a zero discharge mine after the

initial phases when groundwater will be predominately used

for the construction phase of the Project.

The Company has invested in the Marapong Boikarabelo Effluent Transfer Project (MBET) which involves the construction of a waste water treatment plant and pipeline to the mine. It is also intended to improve the treatment of effluent generated by the nearby Marapong and Lephalale communities. On completion this project will become the mine’s bulk water supply.

Monitoring and complianceGiven the mine’s licensing and permitting approvals, management has to ensure compliance with a number of requirements which relies on identifying, monitoring, inspecting and self-auditing our activities. Even at this early stage a full-time environmental officer is tasked with ensuring daily monitoring and control of performance against our environmental licensing requirements. The current monitoring programme includes:

• biomonitoring of the Limpopo River;

• water quality monitoring;

• water level monitoring;

• water use monitoring;

• dust fall-out monitoring; and

• noise monitoring.

Collaboration towards a sustainable environmentBoikarabelo is committed to working in collaboration with Government and the players of the Waterberg coalfield to achieve sustainable environmental management.

ENVIRONMENT

Responsible mining continued

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1. Coal Mining Tenements

Type Right Number Holder Interest Area (km2)

a) Mining Rights

Witkopje (Ledjadja #1) MPT15/2012 MR Ledjadja Coal (Pty) Limited 74% 17

Draai Om (Ledjadja #2) MPT15/2012 MR Ledjadja Coal (Pty) Limited 74% 11

Kalkpan (Ledjadja #3) MPT15/2012 MR Ledjadja Coal (Pty) Limited 74% 13

Osorno (Ledjadja #4) MPT15/2012 MR Ledjadja Coal (Pty) Limited 74% 11

Zeekoevley (Ledjadja #5) MPT15/2012 MR Ledjadja Coal (Pty) Limited 74% 13

Vischpan (Ledjadja #6) MPT15/2012 MR Ledjadja Coal (Pty) Limited 74% 12

Kruishout (Ledjadja #7) MPT15/2012 MR Ledjadja Coal (Pty) Limited 74% 12

b) Prospecting Rights

Koert Louw Zyn Pan (Waterberg #1) PR678/2007 Waterberg One Coal (Pty) Limited 74% 14

Lisbon (Waterberg #2) PR720/2007 Waterberg One Coal (Pty) Limited 74% 8

Zoetfontein (Waterberg #3) PR720/2007 Waterberg One Coal (Pty) Limited 74% 10

All of the rights listed above are located in the Waterberg region of South Africa.

The Mining Right Application for Kubu, adjacent to Boikarabelo, was lodged at the end of 2015. Kubu was previously known as Waterberg #1 and encompasses the farm Koert Louw Zyn Pan (PR678/2007).

The Company is in the process of relinquishing PR720/2007, over the properties Lisbon and Zoetfontein, as these are distant from Boikarabelo and contain minimal resources that have not been included in the stated JORC resource.

2. Coal Resources Statement

2016 2015Inferred

Resource*Indicated

Resource*MeasuredResource*

Total CoalResource*

Total CoalResource*

(mt) (mt) (mt) (mt) (mt)

Waterberg #1 SW – – 426.3 426.3 426.3

Waterberg #1 NE – 551.7 – 551.7 551.7

Ledjadja #1 S & Ledjadja #3 – – 664.2 664.2 664.2

Ledjadja #2 791.3 – – 791.3 791.3

Ledjadja #1 N 688.3 – – 688.3 688.3

Total 1 479.6 551.7 1 090.5 3 121.8 3 121.8

* Total in situ tonnes of coal excluding shale content. The total Coal Resources including shale is 6.4 billion tonnes.

Coal Resources and Coal Reserves

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Coal Resources and Coal Reserves

Annual review

The Company confirms that it has reviewed the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (The JORC Code, 2004 Edition) as presented in this report on 31 August 2016 and is not aware of any new information or data that materially affects the original ‘Resource Generation’s reserves upgraded’ ASX announcement of 16 December 2010 and in the case of estimates that all material assumptions and technical parameters underpinning the Coal Resource Estimate in that announcement continue to apply and have not materially changed as at 30 June 2016. The Company also confirms that the form and context in which the Competent Person’s findings are presented have not materially changed from the original announcement.

Coal Resource governance

The Coal Resources for Boikarabelo have been compiled in accordance with the guidelines defined in the JORC Code 2004 Edition and have not been updated for the revised JORC 2012 Edition. The governance and internal controls that were applied at that time were set out in the ASX Announcement of 16 December 2010. The key aspects of these have been replicated in the Competent Person’s Statement below.

Competent Person’s statement

This information was prepared and first disclosed under the JORC Code 2004 Edition. It has not been updated since to comply with the JORC Code 2012 Edition on the basis that the information has not materially changed since it was last reported. Information in this report that relates to Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Mr Dawie van Wyk who is a consultant to the Company and is a member of a Recognised Overseas Professional Organisation. Mr van Wyk has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 and 2012 Editions of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr van Wyk has given and has not withdrawn consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

3. Coal Reserves Statement

2015ProbableReserve

(mt)

Waterberg #1 SW 314.2

Ledjadja #1 S & Ledjadja #3 430.6

Total 744.8

Coal Reserves

The Company has recently completed a base case financial model (BCFM) as part of the financing of Boikarabelo. This BCFM has been based on a new mine plan and execution strategy. As result the Company is currently reviewing the Probable Coal Reserves previously disclosed in 2015 and plans to release a revised Coal Reserves Statement prior to 31 December 2016.

Competent Person’s statement

The 2015 Coal Reserves information was prepared and first disclosed under the JORC Code 2004 Edition. It was not updated for the 30 June 2015 reporting in order to comply with the JORC Code 2012 Edition on the basis that the information had not materially changed since previously reported. Information in this report that relates to Exploration Results, Mineral Resources or Ore Reserves is based on information compiled by Mr Dawie van Wyk who is a consultant to the Company and is a member of a Recognised Overseas Professional Organisation. Mr van Wyk has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr van Wyk has given and has not withdrawn consents to the inclusion in the report of the matters based on his information in the form and context in which it appears.

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Corporate governance

Resgen is committed to maintaining high standards of corporate governance. The Company’s approach to corporate governance is guided by the principles of fairness, accountability, responsibility and transparency.

The Company, after considering the size and scale of current operations, has adopted all relevant ASX Corporate Governance Council Principles and Recommendations. Compliance with these principles and recommendation is set out in the 2016 Corporate Governance Statement released to the ASX and JSE and included on the website. A summary of the Corporate Governance structures that have been established by the Board is set out below.

BOARD COMPOSITION AND CHARTER The Board currently comprises six members – five of these are Independent Non-executive Directors at 30 June 2016, being Denis Gately, Leapeetswe Molotsane, Dr Konji Sebati, Colin Gilligan and Rob Croll.

A brief summary of the skills, experience and expertise of each Director who is in office at the date of this report and their term of office can be found in the Directors’ Report on page 5, 35 to 37. All Directors were elected to the Board on 26 November 2015 and have been in office for seven months at 30 June 2016.

Independent Directors have the right to seek independent professional advice in the furtherance of their duties as Directors at the Company’s expense. Written approval of the Chairman is required, but this is not to be unreasonably withheld.

The Company has established a Board Charter which details the adopted practices and processes in relation to matters reserved for the Board’s consideration and decision-making and specifies the level of authorisation provided to other key management personnel.

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Corporate governance

The primary responsibilities of the Board as set out in the Charter and include:

• ensuring compliance with all relevant regulations, in particular the Corporations Act, mining, safety and environmental regulation, industrial and associated legislation and Accounting Standards;

• promoting ethical and responsible decision making;

• providing input into and final approval of management’s development of corporate strategy and performance objectives;

• monitoring senior management’s performance and implementation of strategy and ensuring the appropriate resources are available;

• monitoring the operating and financial performance of the Company and approving annual operating and capital budgets;

• promoting a culture of workplace health and safety and environmental responsibility;

• monitoring the performance of the Board, CEO and executive management;

• ensuring a clear link between performance and remuneration;

• overseeing the integrity of the accounting and corporate reporting systems, including the external audit; and

• ensuring that an appropriate framework is in place to monitor business risk and to establish internal controls.

The day-to-day management of the Company’s affairs and the implementation of the corporate strategy have been formally delegated by the Board to the CEO.

The Company has a written agreement with all Non-executive Directors which sets out the terms and conditions associated with their office.

The roles of the Chairman of the Board and the CEO are separate.

The executive management and the Company Secretary keep the Board informed of all developments in the Company.

The Board, appointed on 26 November 2015, met four times in the period to 30 June 2016.

The current membership of all the Board sub-committees is reflected in the 2016 Corporate Governance Statement available on the Company’s website.

MONITORING PERFORMANCEThe Company has a policy of reviewing the performance of its Board, its Committees and individual Directors as set out in the Nominations Charter. The process is managed by the Chairman of the Board or the Committees and is based on self-assessment feedback provided by way of a structured questionnaire. The results of the feedback are then summarised and tabled for discussion.

A review of board performance was not completed in the current reporting period as the composition of the whole board changed on 26 November 2015. The timing of the first review for the new Board will be scheduled on completion of the first year in office and will occur prior to the end of the 2017 financial year.

ROTATION AND RETIREMENT FROM THE BOARDIn accordance with the Company’s Constitution, members appointed to fill a casual vacancy during the year, together with one-third of the Directors shall retire from office at each AGM. The first to retire are the longest-serving members. Retiring Directors can be nominated for re-election by the shareholders at the AGM.

NOMINATION COMMITTEEThe Board has established a Nomination Committee. The roles and responsibilities of a Nomination Committee are set out in a separate charter which is included on the Company’s website.

The primary responsibilities of the Nomination Committee include:

• annually reviewing the composition of the Board and making recommendations on the appropriate skills mix, personal qualities, expertise, ability to exercise independent judgement and diversity required to discharge the Board’s duties;

• recommending to the Board candidates the Committee considers appropriate for appointment or removal to/from the Board having regard to the skills, experience, ability to exercise independent judgement and expertise assessments completed;

• ensuring that an effective induction process for individual Directors of the Board is in place, with regular reviews of its effectiveness;

• establishing and maintaining the selection, appointment and succession planning process of Resgen’s Managing Director or CEO; and

• establishing and maintaining the process for the review of the performance of individual Directors and the Board as a whole.F

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Corporate governance continued

AUDIT COMMITTEEThe Company has established an Audit Committee. The Committee consists of a majority of independent Non-executive Directors. The qualifications and experience of those appointed to the Audit Committee are included in the Directors’ Report on pages 35 to 37.

The Audit Committee Charter can be found on the Company’s website. Responsibilities of the Audit Committee include appointment, compensation and oversight of the independent auditor, review of the half-year and full-year financial statements and review of the governance framework.

The Audit Committee is also responsible for ensuring that the Company adopts, maintains and applies appropriate accounting and financial reporting policies and procedures.

RISK MANAGEMENT COMMITTEEThe Board has established a separate Risk Management Committee. The Charter for this committee can be found on the Company’s website.

The Risk Management Committee members are risk-aware and have appropriate understanding of the industry in which the Company operates. The primary purpose of the Risk Management Committee is to assist the Board to discharge its responsibilities in the following:

• leading the Company’s strategic direction in the management of material business risk;

• overseeing the establishment and implementation of a risk management framework; and

• reviewing the effectiveness of that risk management framework in identifying and managing risks and controlling internal processes

The Committee consists of a majority of independent Non-executive Directors. The qualifications and experience of those appointed to the Risk Management Committee are included in the Directors’ Report on pages 35 to 37.

The Company has a Risk Management Policy together with a Risk Management Strategy, Plan and Procedure document.

REMUNERATION COMMITTEEThe Board has established a Remuneration Committee comprising two Directors, one of whom is independent. The Board intends to appoint a further independent member to the Committee once the mine is operational (with larger employee numbers).

The Company has adopted a Remuneration Committee Charter, which is set out on the website. The primary objective of the Remuneration Committee is to assist the Board discharge its responsibilities, in the following areas:

• ensuring that the appropriate procedures exist to assess the remuneration levels of the Chairperson, Non-executive Directors, Executive Directors, direct reports to the CEO, Board Committees and the Board as a whole;

• ensuring that the Company adopts, monitors and applies appropriate remuneration policies and procedures; and

• ensuring reporting disclosures related to remuneration meet the Board’s disclosure objectives and all relevant legal requirements.

SOCIAL, ETHICS AND TRANSFORMATION COMMITTEEThe Board has appointed a Social and Ethics and Transformation Committee comprising Deputy Chairman Lulamile Xate, Non-executive Director Papi Molotsane and CEO Rob Lowe. The Committee monitors inter alia compliance with United Global Compact principles, OECD recommendations regarding corruption, employment equity, black economic empowerment and community responsibility.

The Committee has been tasked with the preparation of Terms of Reference for approval by the Board.

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Directors’ report 35

Auditor’s independence statement 52

Financials 53

Directors’ declaration 84

Independent Auditor’s report 85

Rand accounts 87

Shareholder information 90

Corporate directory Inside back cover

Note: The timelines and dates for completing the Project financing and construction as detailed in the Director’s Report dated 30 August 2016 have subsequently been revised as outlined on pages 6 to 32.

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35

Directors’ reportFor the year ended 30 June 2016

Your Directors present their report on the consolidated entity (referred to hereafter as the Group) consisting of Resource Generation Limited (the Company) and the entities it controlled at the end of, or during, the year ended 30 June 2016.

1. DIRECTORSThe following persons were appointed Directors of Resource Generation Limited during the period and were still in office at the date of this report:

Length of Service

Mr D Gately Chairman Appointed 26 November 2015 0.6 years

Mr L Xate Deputy Chairman Appointed 26 November 2015 0.6 years

Mr R Croll Non-Executive Director Appointed 26 November 2015 0.6 years

Mr C Gilligan Non-Executive Director Appointed 26 November 2015 0.6 years

Mr L Molotsane Non-Executive Director Appointed 26 November 2015 0.6 years

Dr K Sebati Non-Executive Director Appointed 26 November 2015 0.6 years

The following persons were Directors of Resource Generation Limited from the beginning of the period and removed from office by shareholders at an EGM as indicated below:

Mr B Warner Chairman Removed 26 November 2015

Mr P Jury Managing Director Removed 26 November 2015

Mr S Matthews Executive Director Removed 26 November 2015

Mr G Rose AO Non-Executive Director Removed 26 November 2015

Mr M Meintjes was appointed Company Secretary on 26 November 2015. Mr S Matthews was Company Secretary until 26 November 2015.

Information on DirectorsDenis Gately – Independent Chairman

BA, LLB (Syd), FAICD

Experience and expertiseDenis is a senior energy and resources lawyer who was a partner in Minter Ellison for 23 years until his retirement in June 2010, with extensive experience in the energy and resources industry sectors both in Australia and overseas. Since his retirement as a partner, Denis has gained considerable experience as a non-executive director of a number of listed and unlisted Australian companies, including with business interests offshore Australia. These include Gloucester Coal Ltd, Alligator Energy Ltd (chair), Xanadu Mines Ltd (chair) and Murphy Pipe and Civil (chair).

Other current directorships or former directorships in the last three years

None.

Interests in shares and performance share rights

400 000 ordinary shares in Resource Generation Limited

Nil performance share rights

Special responsibilitiesMember of the Audit CommitteeChairman of the Remuneration CommitteeChairman of the Nomination Committee

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36 Annual report 2016

Lulamile Xate – Deputy Chairman

B.Compt; Post Grad. Diploma Energy Studies

Experience and expertiseLulamile has a wide range of business experience. Having completed articles at PricewaterhouseCoopers he has developed a number of successful businesses in the fishing, gas and forestry industries and is a director and chairman of a number of unlisted companies. Lulamile is a founding member and director of Altius Investment Holdings (Pty) Limited (Altius). Altius is rated BBBEE level 1, the highest rating under a statutory programme to integrate black South Africans into the economy.

Lulamile has degrees and qualifications from UNISA and University of Murdoch, Perth in Australia where he studied energy management and renewable energy systems at post-graduate level.

Interests in shares and performance share rightsNil ordinary shares in Resource Generation LimitedNil performance share rights

Other current directorships or former directorships in the last three yearsNone.

Special responsibilitiesChairman of the Audit CommitteeMember of the Remuneration Committee

Rob Croll – Independent Non-Executive Director

BSc, Mining Engineering, MBA

Experience and expertiseRob is a mining engineer with over 40 years’ experience in the mining industry. After serving in senior management positions with De Beers Consolidated Mines Ltd and the Anglo American Corporation of SA Ltd, Rob played a major role in managing the due diligence process for acquisitions for AngloGold Ltd. Thereafter Rob worked as a Principal Consultant with The MSA Group and now acts as an independent mining consultant.



Special responsibilitiesMember of the Risk Management CommitteeMember of the Nomination Committee

Directors’ report continuedFor the year ended 30 June 2016

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Directors’ report

Colin Gilligan – Independent Non-Executive Director

BSc Eng (Hons)

Experience and expertiseColin is a mining engineer with extensive experience of contract mining and project construction. Colin has 30 years’ experience as general manager and COO of coal mining companies and more recently as COO of Mitsui Coal. As COO of Coalspur Mines, Colin was a key participant in raising a US$350 million debt facility.



Special responsibilitiesChairman of the Risk Management Committee Member of the Nomination Committee

Leapeetswe (Papi) Molotsane – Independent Non-Executive Director

B.Eng Tech (Univ of Toledo, USA), BSc (Univ of Toledo, USA), MSc (Hood College, USA) and SEP (Stanford Univ, USA)

Experience and expertisePapi has a distinguished business career having served on the Board and as Chief Executive Officer of Telkom, Chief Executive of Africa Commodities Group, Group Executive of Transnet and Chief Executive Officer of Fedics. Papi is currently a director of his family investment holding company.



Special responsibilitiesMember of the Risk Management Committee

Dr Konji Sebati – Independent Non-Executive Director

BSc, MBChB

Experience and expertiseKonji is a medical practitioner and the CEO of IPASA, the Innovative Pharmaceutical Association of South Africa. After practicing in the public health sector for several years where she specialised in Primary Health Care and Child Health, she joined the private sector and served in senior positions in South Africa and USA with Roche and Pfizer. Konji was appointed South African Ambassador to Switzerland in 2004 and Ambassador to France in 2008. In 2010 she joined WIPO, the World Intellectual Property Organisation in Geneva, Switzerland.



Special responsibilitiesMember of the Audit Committee

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Meetings of DirectorsThe number of meetings of the Company’s Board of Directors held during the year ended 30 June 2016, and the number of meetings

attended by each Director was:

MEETINGS OF COMMITTEES

Full meetings of Directors Audit RiskHeld Attended Held Attended Held Attended

D Gately 4 4 2 2 – –

L Xate 4 4 2 2 – –

R Croll 4 4 – – 2 2

C Gilligan 4 4 – – 2 2

L Molotsane 4 4 – – 2 2

Dr K Sebati 4 4 2 2 – –

B Warner 15 15 1 1 1 1

P Jury 15 15 – – 1 1

S Matthews 15 15 – – – –

G Rose 15 15 1 1 1 1

MEETINGS OF COMMITTEES

Remuneration NominationHeld Attended Held Attended

D Gately 2 2 – –

L Xate 2 2 – –

R Croll – – – –

C Gilligan – – – –

L Molotsane – – – –

Dr K Sebati – – – –

B Warner – – – –

P Jury – – – –

S Matthews – – – –

G Rose – – – –

2. PRINCIPAL ACTIVITIESDuring the year the principal continuing activities of the Group consisted of the development of the Boikarabelo Coal Mine in the

Waterberg region of South Africa.

3. OPERATING AND FINANCIAL REVIEWCorporateFollowing the receipt on 28 September 2015 of a requisition for a General Meeting from Altius Investment Holdings (Pty) Limited

(“Altius”) to replace the Company’s Board, the Company submitted an application to the Takeovers Panel seeking a declaration of

unacceptable circumstances in relation to the affairs of the Company with orders that, among other things, the Company’s majority

shareholders, Shinto Torii Inc. (a subsidiary of Altius), Noble Group Limited (“Noble”) and Public Investment Corporation of South Africa

SOC Limited, be excluded from voting at the General Meeting. The Takeovers Panel declined to make such an order and, at the General

Meeting held on 26 November 2015, shareholders approved the election of a new Board of Directors of the Company as listed above.

The new Board appointed Mr R Lowe as the Chief Executive Officer effective 26 November 2015.


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Directors’ report

On 25 November 2015, the day prior to the General Meeting, the former Managing Director of the Company approved the retrenchment of all Sydney office staff. In addition, the former Board approved the payment of termination benefits to the two Executive Directors in their expectation that their position as directors would be terminated at the General Meeting to be held the following day. Termination benefits totalling $2,303,504 were paid to the former Board members, executives and staff on the same day. The new Board is seeking legal advice in relation to the payment of the termination benefits.

The new Board met in South Africa on 14 December 2015 and subsequently the Chairman released a board report to shareholders on 16 December 2015 outlining the Board’s priorities with respect to rebuilding the executive team, meeting with potential funders, reviewing the Boikarabelo Coal Mine architecture and evaluating alternative mine operating models.

On 22 January 2016, the Company appointed Grant Samuel to advise the Board in connection with the funding of the Boikarabelo Coal Mine project (“the project”). In-depth discussions, including due diligence investigations, with a number of parties concerning proposed funding solutions have taken place during the period. Of the proposals investigated by the Company, the preferred funding solution is the debt funding referred to in previous announcements which is being negotiated with FirstRand Bank Limited, acting through its Rand Merchant Bank division (“RMB”), Noble Group Limited (“Noble”), Public Investment Corporation of South Africa SOC Limited (“PIC”), Industrial Development Corporation Limited (“IDC”) and Export Finance and Insurance Corporation (“Efic”) (collectively “the Financing Syndicate”).

The strategic realignment of the project with South Africa, and the appointment of South African representatives to the Board and the appointment of a South African management team has secured a high degree of comfort and goodwill from the South African-based prospective lenders, RMB, PIC and IDC, from whom the bulk of the debt funding will be sourced.

On 17 February 2016, the Company appointed RMB as lead arranger and co-lender for the financing of the project. RMB is a leading financier in the resource sector in South Africa and enjoys an excellent reputation for the completion of project funding packages, including a recent R10 billion debt facility for a client despite the prevailing difficult economic climate. The Company is confident that RMB and all members of the Financing Syndicate are committed to complete the funding process in the shortest time possible. In conjunction with RMB, the Company is considering other providers of funding and credible solutions will be incorporated into the Financing Syndicate as required.

On 8 August 2016, the Company announced that it had agreed the commercial terms on which the Financing Syndicate will seek their requisite approvals in order to secure funding of R5.52 billion ($515 million) to complete the construction of the Boikarabelo Coal Mine. The Company has also held discussions with the Export Finance and Insurance Corporation (Efic) with a view to Efic joining the Financing Syndicate. Efic has been included in discussions of the terms and has commenced with its due diligence on the project.

The funding package, which is subject to credit approval by all members of the Financing Syndicate, is expected to provide the remainder of the total funds required to complete construction of the mine and provide the necessary headroom for contingencies. Credit approval and financial close is targeted by end October 2016. On this basis construction of the mine is scheduled to be completed in September 2018, with first saleable production in the last quarter of 2018.

Financial headlines• Loss before income tax increased by 55% to $7.7 million

• Net debt of $27.7 million at 30 June 2016

• Conservatively geared at 22.6% at 30 June 2016

• The most significant items contributing to the 2016 loss before income tax were:

(i) Unrealised foreign exchange loss of $4.2 million being the net of an unrealised loss of $5.0 million from translation of the Noble loan of US$20.0 million and an unrealised gain of $0.8 million from translation of US$ cash balances in hand at 30 June 2016;

(ii) Termination benefits of $2.3 million paid to executive directors and employees; these payments were approved by the previous directors on 25 November 2015; and

(iii) A credit of $1.9 million has been recorded following the cancellation of performance share rights previously awarded to executives and employees whose employment was terminated on 25 November 2015.

• Cash expenditure of $5.2 million on operating activities incorporating the $2.3 million termination benefits referred to above

• Cash expenditure of $9.4 million on mine infrastructure

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• Agreed deferral of Noble loan repayments from June 2016 to February 2017 to conserve existing cash balances

• Adjustments through retained earnings for the previously recorded loan receivable to the Group’s BEE partner and foreign exchange translation impact of historical acquisition adjustments (refer Note 3 ‘Critical accounting estimates and judgements’)

• Shareholders’ equity has seen a reduction of $29.1 million in the period due to a combination of the reported loss and the exchange differences on translation of South African operations amounting to $19.6 million

The financial position of the Group is sound, with efforts focused to secure funding to support the construction of the Boikarabelo Coal Mine. The Boikarabelo Coal Mine in South Africa is the only segment of the Group. Further information on the operations and financial position of the Group is set out in this annual financial report.

Review of operationsConstruction of some of the mine’s infrastructure continued during the period while project debt funding was being negotiated. Major construction activities can commence after project funding is finalised. The items that occurred during the period were:

• EHL Energy (Pty) Limited completed the erection of power poles and transmission lines for the 132kV power supply. The substation and switch room were also completed during the period. The power supply infrastructure is funded by a deferred payment facility;

• At the network stabilisation facility (“NSF”), the 26 tonne axle load switch and signalling system was installed and commissioned. In addition 400 metres of rail was installed to allow for construction access for the rest of the railway line system to the mine; and

• The Marapong effluent treatment facility in Lephalale and the 58 kilometre pipeline to Boikarabelo Coal Mine are an integral part of the mine’s social and labour plan. Earthworks were previously completed for a 13 kilometre section of the pipeline adjacent to a main road. Installation of 13 kilometres of water pipeline was completed during the period.

The work of the Technical Committee, established by the Board in December 2015 to review all aspects of the project, has now been substantially completed. The Technical Committee has overseen the development of a new execution strategy that will reduce the capital cost of the project and reduce risk through the appointment of established EPC contractors with good track records and substantial balance sheets. A new mining plan has also been developed which will maximise recovery of the coal deposit by mining all seams and minimise out-of-pit dumping of waste, resulting in increased productivity and reduced operating costs. All efforts at the mine are now being directed towards having the project ready for mobilisation of the first of the EPC contractors in Q4 2016.

A Heads of Agreement was concluded with Sedgman Limited (ASX/JSE Announcement: 6 May 2016) for the procurement and construction of the coal handling plant for a lump sum fixed price of US$141 million. This represents a substantial saving over the previously announced estimate of US$200 million.

A Request for Information was issued to seven established mining contract companies in March 2016. All responded and a Request for Proposal was delivered to a short list of three candidates at the beginning of June 2016 with the appointment of the mining contractor expected during Q3 2016.

A concept feasibility study for a 300MW coal fired power station (“IPP”) has been received and reviewed. There is a very compelling economic case for a mouth-of-mine IPP with sale of the electricity produced to the national utility or a private offtaker. The study does however indicate that 300MW IPP is not optimal and that 450MW or 600MW presents a more compelling economic case. This option is now being investigated.

Negotiations with Transnet Freight Rail concerning the rail tariff, access to Richards Bay Coal Terminal and construction of the rail link are proceeding in a very positive manner.

DividendsNo dividends were paid or proposed to be paid to members during the financial year (2015: nil).

Results of operationsThe loss for the year for the Group was $7.7 million (2015: $4.9 million loss).


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Directors’ report

Matters subsequent to the end of financial yearThere are no other events that have occurred subsequent to the end of the financial year that have significantly affected or may significantly affect:

(i) the Group’s operations in future financial years;

(ii) the results of those operations in future financial years; or

(iii) the Group’s state of affairs in future financial years.

Likely developments and expected results of operationsFurther information on likely developments in the operations of the Group and the expected results of operations are expanded upon elsewhere in this report. After finalisation of the funding package, the focus of the next two years will be the construction of the Boikarabelo Coal Mine with production targeted for the 2019 financial year.

Environmental regulationThe Group’s Directors and management are committed to continual improvement in the environmental management of the Group’s operations and to develop effective community and stakeholder relationships.

The Group is aware of the environmental regulations applying to its operations and seeks to comply with them in all relevant jurisdictions. There have been no environmental incidents throughout the year.

4. REMUNERATION REPORTThe Board is committed to clear and transparent disclosure of the Group’s remuneration arrangements.

The remuneration report is set out under the following main headings:

(i) Principles used to determine the nature and amount of remuneration;

(ii) Details of remuneration;

(iii) Service agreements; and

(iv) Share-based compensation.

i) Principles used to determine the nature and amount of remuneration The objective of the Group’s executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with achievement of strategy objectives and the creation of value for shareholders, and conforms with market best practice for delivery of reward. The Board ensures that the executive reward satisfies the following key criteria for good governance practices:

a) Competitiveness and reasonableness;

b) Acceptability to shareholders;

c) Performance linkage / alignment of executive compensation;

d) Transparency; and

e) Capital management.

The Group has structured an executive remuneration framework that is market competitive in order to attract and retain high-calibre executives and which is complementary to the reward strategy of the organisation. The framework provides a mix of fixed and variable pay, and a blend of short and long-term incentives. The remuneration of executives is aligned to key milestones in the development of the Boikarabelo Coal Mine.

The Remuneration Committee monitors the effectiveness of the remuneration framework in order to balance appropriate reward and incentive with shareholder interests.

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Alignment with shareholders’ interests:

a) focuses on sustained growth in shareholder wealth; and

b) attracts and retains high calibre executives.

Alignment with performance:

Incentives focus on achieving key Group milestones, including obtaining relevant licences, funding and development of the Boikarabelo Coal Mine.

Alignment with program participants’ interests:

a) rewards capability and experience; and

b) provides a clear structure for earning rewards.

The Remuneration Committee makes recommendations to the Board on remuneration and incentive policies and practices and other terms of employment for executive and non-executive directors and other senior executives.

The Company does not use a remuneration consultant.

Executive directors and key management personnel

Fees and payments to Executive directors reflect the demands which are made on, and the responsibilities of, the Directors. Executive directors’ fees and payments are reviewed annually by the Remuneration Committee. The Board also ensures that Executive directors’ fees and payments are appropriate and in line with the market. Executive directors do receive security-based payments as part of their compensation package, as disclosed below. At 30 June 2016 there were no Executive directors in office.

Short-term incentives

Short-term incentives (STI) are offered on a competitive basis considering a total remuneration package benchmarked against relevant industry groups and having regard for the specific circumstances of the Group. The components of each executive’s total remuneration package is weighted in accordance with their role and responsibilities.

The Remuneration Committee recommends to the Board appropriate targets and key performance indicators (KPIs) to link the STI plan and the level of payout if targets are met. This includes setting any maximum payout under the STI plan, and minimum levels of performance to trigger payment of STIs. Further details are noted under iii) below.

There were no STIs paid during the current financial year as there were no targets set for the current financial year given the recent appointment of the Group’s new executive.

Long-term incentive plan

The long-term incentive plan (LTIP), known as the Employee Share Plan, was approved by shareholders at the October 2014 Annual General Meeting. Performance share rights are granted under the LTIP to employees eligible to participate in the plan i.e. those at an executive level. The Company will seek shareholder approval at an Annual General Meeting prior to any performance share rights being issued to the CEO. The LTIP to 26 November 2015 was focused on achieving key Group milestones including funding and development and initial coal production of the Boikarabelo Coal Mine as per section (iv) in the Remuneration Report. Performance share rights are granted under the LTIP for no consideration. Performance share rights vest over periods ranging from one to five years with non-market based performance hurdles determined by the executive’s role and responsibilities.

Each year the Board, on the recommendation of the Remuneration Committee, considers whether senior executives should be awarded performance share rights under the LTIP and considers the appropriate targets and key performance indicators to determine what hurdles are appropriate for vesting to occur. There have been no new grants since the establishment of the Remuneration Committee formed by the new Board and the LTIP has been put on hold pending finalisation of project funding.


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Directors’ fees

The amount of remuneration of the Directors of Resource Generation Limited is set out in the table below.

ChairmanDeputy

ChairmanSouth African

MemberAustralian Member

$ $ $ $

Board 125 000 42 600 42 600 75 000

Audit Committee* – – – –

Risk Management Committee* – – – –

Remuneration Committee* – – – –

Nomination Committee* – – – –

* No additional fees are payable for serving on a committee

Retirement allowances and benefits for Directors

There are no retirement allowances or other benefits paid to Directors.

ii) Details of remuneration Details of the nature and amount of each element of the emoluments of Directors and key management personnel of Resource Generation Limited and the Group are set out in the following tables.

The Non-executive directors do not receive performance share rights.

The key management personnel of the Group during the year ended 30 June 2016 were as follows:

D Gately Chairman Appointed 26 November 2015

L Xate Deputy Chairman Appointed 26 November 2015

R Croll Non-Executive Director Appointed 26 November 2015

C Gilligan Non-Executive Director Appointed 26 November 2015

L Molotsane Non-Executive Director Appointed 26 November 2015

Dr K Sebati Non-Executive Director Appointed 26 November 2015

R Lowe Chief Executive Officer Appointed 26 November 2015

H van den Aardweg General Manager In employment for the full year

B O’Regan Chief Financial Officer In employment for the full year

M Meintjes Company Secretary Appointed 26 November 2015

B Warner Chairman Removed 26 November 2015

P Jury Managing Director Removed 26 November 2015

S Matthews Executive Director Removed 26 November 2015

G Rose AO Non-Executive Director Removed 26 November 2015

M Collopy Chief Financial Officer Terminated 25 November 2015

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a) Remuneration

SHORT-TERM BENEFITS POST-EMPLOYMENT BENEFITS

FY

Board and Committee

fees

Non- monetaryBenefits

Otherfees1

Super- annuation

benefitsTermination

benefits

Total Remuneration

for services as a Non-executive

director$ $ $ $ $ $

Non-executive directors

D Gately 2016 67 950 – 25 023 8 832 – 101 805

2015 – – – – – –

L Xate 2016 25 357 – 10 132 – – 35 489

2015 – – – – – –

R Croll 2016 25 357 – – – – 25 357

2015 – – – – – –

C Gilligan 2016 40 770 – 284 300 3 873 – 328 943

2015 – – – – – –

L Molotsane 2016 25 357 – 17 997 – – 43 354

2015 – – – – – –

Dr K Sebati 2016 25 357 – – – – 25 357

2015 – – – – – –

G Rose2 2016 27 674 – – 2 629 – 30 303

2015 63 863 – – 6 067 – 69 930

B Warner2 2016 38 447 – – 14 583 – 53 030

2015 87 378 – – 35 000 – 122 378

Total 2016 276 269 – 337 452 29 917 – 643 638

2015 151 241 – – 41 067 – 192 308

1 Certain non-executive directors received additional remuneration for work undertaken on behalf of the Group outside of the scope of non-executive director responsibilities. The terms of this consultancy work are market-related and at arms length and are based on a fixed hourly and/or daily rate.

2 Removed from office 26 November 2015.

Other than as disclosed in the table above, there were no fees paid to Director-related entities.


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Directors’ report

The following table sets out the statutory remuneration disclosures required under the Corporations Act 2001 and has been prepared in accordance with the appropriate accounting standards and has been audited.

FY

Salary Other

Super- annuation

benefits

Longservice

leaveTermination

benefits3Performance

Shares4Total

remuneration$ $ $ $ $ $ $

Executive directors

P Jury1 2016 259 587 – 14 583 47 982 1 079 146 – 1 401 298

2015 597 700 – 35 000 85 191 – 534 834 1 252 725

S Matthews1 2016 192 247 – 14 583 36 197 658 016 – 901 043

2015 442 300 – 35 000 64 267 – 267 417 808 984

Other Executives

R Lowe2 2016 476 190 – – – – – 476 190

2015 – – – – – – –

H van den Aardweg 2016 369 981 – – – – – 369 981

2015 365 178 16 893 – – – 131 915 513 986

B O’Regan 2016 227 760 17 435 – – – – 245 195

2015 234 004 17 796 – – – 106 967 358 767

M Meintjes2 2016 43 230 – – – – – 43 230

2015 – – – – – – –

A McLeod5 2016 – – – – – – –

2015 345 000 10 500 – – – (330 590) 24 910

M Collopy1 2016 43 290 – – 6 745 47 134 – 97 169

2015 99 900 – – 9 499 – 5 348 114 747

Total 2016 1 612 285 17 435 29 166 90 924 1 784 296 – 3 534 106

2015 2 084 082 45 189 70 000 158 957 – 715 891 3 074 119

1 Removed from office or terminated on 26 November 2015.2 Appointed 26 November 2015.3 Termination benefits in this table are stated net of any amunts previously accrued for annual leave, sick leave and long service leave.4 The table above does not include an amount of $1.9m relating to the forfeited performance share rights of the previous directors/executives which have been reversed

out of the share-based payment reserve and credited to the income statement in 2016.5 Resigned 1 January 2015.

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The table below shows the 2016 annual remuneration packages of all Executive directors and key management personnel. With there having been several changes during the year at Executive director and key management level, this information is provided so that shareholders have a better understanding of executive remuneration over a full year.

Fixed STI LTITermination

benefits1 Other Total$ $ $ $ $ $

Executive directors

P Jury 658 008 – – 1 230 700 – 1 888 708

S Matthews 496 392 – – 772 346 – 1 268 738

Other Executives

R Lowe 800 000 400 000 – – – 1 200 000

H van den Aardweg 363 059 – – – – 363 059

B O’Regan 223 499 – – – 17 435 240 934

M Meintjes2 – – – – – –

M Collopy3 103 896 – – 66 280 – 170 176

1 Termination benefits includes amounts paid for accrued annual leave, sick leave and long service leave.2 Remuneration is based on an agreed houly rate that is market-related and at arms length.3 Not employed full-time.

2015 2016$ $ % change Comments

R Lowe

Cost to Company remuneration – 476 190 n/a Commenced employment 26 November 2015

STI – – n/a Commenced employment 26 November 2015

LTI – – n/a Commenced employment 26 November 2015

Total remuneration – 476 190 n/a

H van den Aardweg

Cost to Company remuneration 365 178 369 981 1% Salary previously denominated in ZAR

STI – – 0% No STIs awarded

LTI 131 915 – -100% No LTIs awarded

Total remuneration 497 093 369 981 -26%

B O’Regan

Cost to Company remuneration 251 800 245 195 -3% Salary previously denominated in ZAR

STI – – 0% No STIs awarded

LTI 106 967 – -100% No LTIs awarded

Total remuneration 358 767 245 195 -32%

M Meintjes

Cost to Company remuneration – 43 230 n/a Commenced employment 26 November 2015

STI – – n/a No STIs awarded

LTI – – n/a No LTIs awarded

Total remuneration – 43 230 n/a


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Directors’ report

The relative proportions of remuneration that are linked to performance and those that are fixed are as follows:

FIXED REMUNERATION AT RISK – STI AT RISK – LTI

2016 2015 2016 2015 2016 2015

Executive directors

P Jury 100% 57% 0% 0% 0% 43%

S Matthews 100% 67% 0% 0% 0% 33%

Other Executives

R Lowe 67% 0% 33% 0% 0% 0%

H van den Aardweg 100% 74% 0% 0% 0% 26%

B O’Regan 100% 70% 0% 0% 0% 30%

M Meintjes 100% 0% 0% 0% 0% 0%

A McLeod 0% 100% 0% 0% 0% 0%

M Collopy 100% 95% 0% 0% 0% 5%

b) Performance share rights

The number of performance share rights over ordinary shares in the Company held during the financial year by each Director and key management personnel of Resource Generation Limited, including their personally related parties, are set out below:

Balance at the start of the year

Granted during

the year

Lapsed or forfeited

during the year

Balance at the end of the year

Vested and exercisable

at the end of the year

Unvested at the end of the year

Executive directors

P Jury* 10 000 000 – (10 000 000) – – –

S Matthews* 5 000 000 – (5 000 000) – – –

Other key management

H van den Aardweg 2 500 000 – – 2 500 000 – 2 500 000

M Collopy* 100 000 – (100 000) – – –

B O’Regan 2 000 000 – – 2 000 000 – 2 000 000

Totals 19 600 000 – (15 100 000) 4 500 000 – 4 500 000

* The share rights were granted in 2014 and forfeited on termination (25 November 2015).

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c) Shareholdings

The number of shares in the Company held during the financial year by each Director and key management personnel of Resource Generation Limited, including their personally related parties, are set out below:

Balance at the start of the year

Receivedduring the year

on the conversionof performance

share rightsOther changes during the year

Balance at the end of the year

Shares Shares Shares Shares

Directors

D Gately – – 400 000 400 000

P Jury* 24 360 591 – (24 360 591) –

S Matthews* 4 175 603 – (4 175 603) –

B Warner* 200 000 – (200 000) –

G Rose* 136 000 – (136 000) –

Other key management

R Lowe – – 2 000 000 2 000 000

H van den Aardweg 1 080 000 – (30 000) 1 050 000

M Collopy* 203 700 – (203 700) –

B O’Regan 276 000 – – 276 000

Totals 30 431 894 – (26 705 894) 3 726 000

* Ceased to be a Director/employee on 26 November 2015

iii) Service agreements Remuneration and other terms of employment for key management personnel are formalised in service agreements. The major provisions of the agreements relating to remuneration are set out below:

R Lowe, Chief Executive Officer

• Contract effective 26 November 2015, minimum term of two years;

• Fixed employment term through to 1 January 2018 after which one month’s notice is required;

• Base salary and superannuation to be reviewed annually;

• Provision of four weeks’ annual leave;

• Provision made for the awarding of bonuses (STI) at the recommendation of the Remuneration Committee based on key performance indicators and appropriate weightings including inter alia completion of the Company’s debt funding arrangements (50%), commencement of construction before the end of September 2016 (10%), recruitment of Chief Operating Officer and other key project executives (10%), completion of geological data base and mining plan (10%), performance of the Company’s share price (5%) and other (15%); and

• Provision made for the award of performance share rights, subject to Board approval.

H van den Aardweg, General Manager

• Contract effective 1 November 2008, no fixed term;

• One month’s notice by employee;

• Termination payments equivalent to three months’ salary package;

• Base salary and superannuation to be reviewed annually;


• Provision made for the awarding of bonuses at the recommendation of the Remuneration Committee; and

• Provision made for the award of performance share rights.


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Directors’ report

B O’Regan, Chief Financial Officer• Contract effective 21 March 2011, no fixed term;

• One month’s notice by employee;

• Termination payments equivalent to three months’ salary package;

• Base salary, superannuation, accommodation and travel allowance to be reviewed annually;


• Provision made for the awarding of bonuses at the recommendation of the Remuneration Committee; and

• Provision made for the award of performance share rights.

M Meintjes, Company Secretary• Contract effective 26 November 2015, no fixed term;

• Six weeks’ notice by employee;

• No provision for termination payments;

• Hourly rate to be reviewed annually;

• No provision of annual leave;

• No provision made for the awarding of bonuses; and

• No provision made for the award of performance share rights.

Non-executive directors serve on a month-to-month basis and there are no termination payments payable.

Key financial data

The tables below set out summary information about the consolidated entity’s earnings and movements in shareholder wealth for the five years to 30 June 2016.

30 June2016

30 June2015

30 June2014

Restated*

30 June2013

Restated*

30 June2012

Restated*$’000 $’000 $’000 $’000 $’000

Revenue 279 677 4 110 638 1 061

Net loss before tax (7 656) (4 944) (1 720) (4 013) (460)

Net loss after tax (7 657) (4 949) (1 727) (4 035) (465)

30 June2016

30 June2015

30 June2014

Restated*

30 June2013

Restated*

30 June2012

Restated*cents cents cents cents cents

Share price at start of year 7 13 20 30 75

Share price at end of year 8 7 13 20 30

Basic earnings per share (1.3) (0.9) (0.4) (1.5) (0.2)

Diluted earnings per share (1.3) (0.9) (0.4) (1.5) (0.2)

* Please refer to Note 3 ‘Critical accounting estimates and judgements’.

There were no dividends paid or proposed during the five years to 30 June 2016.

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iv) Share-based compensationPerformance share rights

Performance share rights are granted under the Long-Term Incentive Plan for no consideration. Performance share rights vest over periods ranging from one to five years with non-market based performance hurdles determined by the executive’s role and responsibilities. The performance hurdles are linked to key development milestones. For the performance share rights current as at 30 June 2016 (as approved by the previous Board), the performance hurdles include the following:a) Funding to enable all material construction, expected during the 2017 financial year.b) Production of the first 100,000 tonnes of ROM coal, expected during the 2019 financial year.The long-term incentive plan has been put on hold by the new Remuneration Committee pending funding of the Boikarabelo Coal Mine.

Unissued ordinary shares of Resource Generation Limited under performance share rights, held by key management, at the date of this report are as follows:

NameGrant date

Financial year in

which rights may vest

Issue price of shares

Value per right at

grant date

Number granted

under right

Maximum total value of grant yet

to vestYear

granted$

H van den Aardweg 28-Jan-14 2018 Nil $0.18 1 000 000 180 000 2014

H van den Aardweg 28-Jan-14 2018 Nil $0.18 1 500 000 270 000 2014

B O’Regan 28-Jan-14 2018 Nil $0.18 1 000 000 180 000 2014

B O’Regan 28-Jan-14 2018 Nil $0.18 1 000 000 180 000 2014

There is no pre-determined vesting or exercisable date for performance share rights. They are converted to shares on the date of vesting, which is at the discretion of the holder once performance hurdles are met. During the year, no performance share rights vested and 15.1 million were forfeited as indicated in section (ii) (b) above.

The assessed fair value at grant date of performance share rights granted to individuals is allocated equally over the period from grant date to vesting date, and the amount is included in the remuneration tables above. The value attached to the performance share right is the share price on the day of issue.

No holder has any right under the performance share rights to participate in any other share issue of the Company or any other entity.

5. ADDITIONAL INFORMATIONa) Shares under optionAt 30 June 2016 there were 6.25m unissued ordinary shares under performance share rights. No performance share rights were converted during the period. Refer to Note 19 of the financial statements for further details.

b) Insurance of officersResource Generation Limited provides a Deed of Indemnity and Access (Deed) in favour of each of the Directors of Resource Generation Limited and its subsidiary companies and each person who acts or has acted as a representative of the Company serving as an officer of another entity at the request of the Company. The Deed indemnifies these persons on a full indemnity basis to the extent permitted by law for losses, liabilities, costs and charges incurred as a Director or officer of the Group. Subject to specified exclusions, the liabilities insured are for costs that may be incurred in defending civil or criminal proceedings that may be brought against Directors and officers in their capacity as Directors and officers of the Group, and other payments arising from liabilities incurred by the Directors and officers in connection with such proceedings. During the financial year, the Company paid insurance premiums to cover, to the extent permitted by law, any claims and expenses which may arise as a result of work performed in their capacities as officers or Directors of the Company. The terms of the contract prohibit the disclosure of the premiums paid.


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Directors’ report

c) Agreement to indemnify officersDuring the financial year, the Company entered into an agreement to provide access to Company records and to indemnify the Directors and officers of the Company. The indemnity relates to any liability:

i) as a result of being, or acting in their capacity as, an officer of the Company to the maximum extent permitted by law.

ii) for legal costs incurred in successfully defending civil or criminal proceedings. No liability has arisen under these indemnities as at the date of this report.

d) Proceedings on behalf of the CompanyNo person has applied to the court under section 237 of the Corporations Act 2001, or any other relevant jurisdiction in which the Company operates, for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party, for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings.

No proceedings have been brought or intervened in on behalf of the Company with leave of the court under section 237 of the Corporations Act 2001.

e) Rounding of amountsThe Company is of a kind referred to in Legislative Instrument 2016/191, issued by the Australian Securities and Investments Commission, relating to the “rounding off” of amounts in the Directors’ report and financial statements. Amounts in the Directors’ report and financial statements have been rounded off in accordance with that Legislative Instrument to the nearest thousand dollars, unless otherwise indicated.

f) Auditor’s independence declarationA copy of the auditor’s independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 52 of the annual financial report.

g) Non-audit servicesThe Company may decide to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Company and Group are important. The Board of Directors has considered the position and, in accordance with the advice received from the Audit Committee, is satisfied that the provision of the non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the provision of non-audit services by the auditor, as set out in Note 21, did not compromise the auditor independence requirements of the Corporations Act 2001.

Signed in accordance with a resolution of the Directors, made pursuant to section 298 (2) of the Corporations Act 2001.

On behalf of the Directors

L XateDeputy Chairman

Johannesburg30 August 2016

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Deloitte Touche Tohmatsu ABN 74 490 121 060

Riverside Centre Level 26 123 Eagle Street Brisbane QLD 4000 GPO Box 1463 Brisbane QLD 4001 Australia

Tel: +61 (0) 7 3308 7000 Fax: +61 (0) 7 3308 7001 www.deloitte.com.au

The DirectorsResource Generation LimitedLevel 1, Station Street,Indooroopilly,QLD 4068

30 August 2016

Dear Board Members


In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the directors of Resource Generation Limited.

As lead audit partner for the audit of the financial report of Resource Generation Limited for the financial year ended 30 June 2016, I declare that to the best of my knowledge and belief, there have been no contraventions of:

(i) the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and(ii) any applicable code of professional conduct in relation to the audit.

Yours sincerely

DELOITTE TOUCHE TOHMATSU

Matthew DonaldsonPartnerChartered Accountants

Liability limited by a scheme approved under Professional Standards Legislation.

Member of Deloitte Touche Tohmatsu Limited.

Auditor’s independence statement

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Consolidated statement of profit or loss and other comprehensive incomeFor the year ended 30 June 2016

CONSOLIDATED

20152016 Restated*

Note $’000 $’000

Interest revenue 5 210 677

Other 5 69 –

279 677

Administration, rent and corporate (1 638) (1 155)

Depreciation of property, plant and equipment 10 (334) (404)

Employee benefits expense (3 682) (1 606)

Finance expenses (22) (2 729)

Share-based compensation credit/(expense) 20 1 906 (797)

Unrealised foreign exchange movements (4 165) 1 070

Loss before income tax (7 656) (4 944)

Income tax expense 6 (1) (5)

Loss from continuing operations (7 657) (4 949)

Loss for the year (7 657) (4 949)

Other comprehensive (loss)/income, net of income tax

Items that may be subsequently reclassified to profit and loss when specific conditions are met:

Exchange differences on translation of foreign operations 20 (19 550) 8 397

Total comprehensive (loss)/income (27 207) 3 448

Loss is attributable to:

Owners of Resource Generation Limited (7 657) (4 949)

Total comprehensive (loss)/income for the year is attributable to:

Owners of Resource Generation Limited (27 207) 3 448

Headline loss (7 657) (4 949)

Loss per share

Loss per share for loss from continuing operations Cents Cents

Basic loss per share 29 (1.3) (0.9)

Diluted loss per share 29 (1.3) (0.9)

Headline loss per share 29 (1.3) (0.9)


The above statement of comprehensive income should be read in conjunction with the accompanying notes.

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Consolidated statement of financial positionAs at 30 June 2016

CONSOLIDATED

20162015

Restated*1 July 2014

Restated*Note $’000 $’000 $’000

Current assets

Cash and cash equivalents 7 11 955 28 551 54 337

Trade and other receivables 8 146 200 414

Deposits and prepayments 9 174 207 140

12 275 28 958 54 891

Non-current assets

Property, plant and equipment 10 30 365 35 464 33 367

Mining tenements and mining development 11 128 644 129 314 89 742

Deposits and loan receivables 12 1 859 2 938 2 307

160 868 167 716 125 416

TOTAL ASSETS 173 143 196 674 180 307

Current liabilities

Trade and other payables 13 6 967 7 320 8 377

Provisions 14 180 987 788

Borrowings 17 3 887 2 661 –

11 034 10 968 9 165

Non-current liabilities

Provisions 15 1 983 204 38

Borrowings 18 35 728 31 221 21 231

Royalties payable 16 1 946 2 716 2 553

39 657 34 141 23 822

TOTAL LIABILITIES 50 691 45 109 32 987

NET ASSETS 122 452 151 565 147 320

Equity

Contributed equity 19 223 622 223 622 223 622

Reserves 20 (50 955) (11 817) (21 011)

Accumulated losses 20 (50 215) (60 240) (55 291)

TOTAL EQUITY 122 452 151 565 147 320


The above statement of financial position should be read in conjunction with the accompanying notes.

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Consolidated statement of changes in equityFor the year ended 30 June 2016

Contributed equity Reserves

Retained earnings

Total equity

Note $’000 $’000 $’000 $’000

Balance at 1 July 2014 (as previously reported) 223 622 (10 090) (37 808) 175 724

Adjustments (see note 3) – (10 921) (17 483) (28 404)

Balance at 1 July 2014 (restated*) 223 622 ( 21 011) ( 55 291) 147 320

Loss for the year – – ( 4 949) ( 4 949)

Other comprehensive income for the year – exchange differences on translation of foreign operations 20 – 8 397 – 8 397

Total comprehensive income/(loss) for the year – 8 397 ( 4 949) 3 448

Transactions with owners in their capacity as owners:

Employee share plan – value of employee services 20 – 797 – 797

– 797 – 797

Balance at 30 June 2015 (restated*) 223 622 (11 817) (60 240) 151 565

Loss for the year – – ( 7 657) ( 7 657)

Other comprehensive loss for the year – exchange differences on translation of foreign operations 20 – ( 19 550) – ( 19 550)

Total comprehensive loss for the year – ( 19 550) ( 7 657) ( 27 207)

Transactions with owners in their capacity as owners:

Transfer of option premium reserve to earnings 20 – ( 17 682) 17 682 –

Employee share plan – value of employee services 20 – ( 1 906) – ( 1 906)

– ( 19 588) 17 682 ( 1 906)

Balance at 30 June 2016 223 622 (50 955) (50 215) 122 452


The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.

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Consolidated statement of cash flowsFor the year ended 30 June 2016

CONSOLIDATED

2016 2015Note $’000 $’000

Cash flows from operating activities

Payments to suppliers and employees (5 369) (2 610)

Interest received 210 677

Finance costs (22) (8)

Taxation payments (1) (4)

Net cash outflow from operating activities 28 (5 182) (1 945)

Cash flows from investing activities

Payments for property, plant and equipment (537) (376)

Net payments for mining related licence deposits – (285)

Payments for mining tenements and mining development (8 836) (28 588)

Net cash outflow from investing activities (9 373) (29 249)

Cash flows from financing activities

Repayment of borrowings (1 935) –

Net cash outflow from financing activities (1 935) –

Net decrease in cash and cash equivalents (16 490) (31 194)

Cash and cash equivalents at the beginning of the year 28 551 54 337

Effects of exchange rate movements on cash and cash equivalents (106) 5 408

Cash and cash equivalents at the end of the year 7 11 955 28 551

The above cash flow statements should be read in conjunction with the accompanying notes.

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Notes to the consolidated financial statementsFor the year ended 30 June 2016

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThe principal accounting policies adopted in the presentation of the consolidated financial statements are as set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The financial statements are for the consolidated entity consisting of Resource Generation Limited and its subsidiaries.

a) Statement of complianceThis general purpose financial report has been prepared in accordance with Australian Accounting Standards, other authoritative pronouncements of the Australian Accounting Standards Board including Interpretations and the Corporations Act 2001. For the purposes of preparing the consolidated financial statements, the Company is a for-profit entity.

It is recommended that this financial report is read in conjunction with any public announcements made by Resource Generation Limited during the year, in accordance with continuous disclosure requirements arising under the Corporations Act 2001.

The accounting policies and methods of computation adopted in the preparation of the financial report are consistent with those adopted and disclosed in the Company's 2015 annual financial report for the year ended 30 June 2015, except for the impact of the Standards and Interpretations described below as set out in Note 3. These accounting policies are consistent with Australian Accounting Standards and with International Financial Reporting Standards.

The financial statements were approved by the Board of Directors on 30 August 2016.

Compliance with IFRS

The financial report of Resource Generation Limited also complies with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").

Going concern

As at 30 June 2016, the Group had net current assets of $1.2 million (2015: $18.0 million), made a loss of $7.7 million (2015: $4.9 million) for the year and recorded a net cash outflow from operations of $5.2million (2015: $1.9 million). The Group has a cash balance at 30 June 2016 of $12.0 million (2015: $28.6 million). The directors have prepared the financial report on a going concern basis.

In concluding that the going concern basis is appropriate, a cash flow forecast was prepared for the 2017 financial year. The forecast assumes the receipt of additional funding following the agreement of commercial terms with a Financing Syndicate to provide R5.52 billion (A$515 million) to complete the construction of the Boikarabelo Coal Mine and meet ongoing working capital requirements. Based on forecast minimum committed costs, the ability of the Company and the Consolidated Group to continue as going concerns is dependent on securing additional funds before the end of the 30 June 2017 financial year.

The Directors are confident that financial close for the funding from the Financing Syndicate can be achieved although, given the numerous conditions precedent contained in the commercial terms, precise time lines are impossible to predict with any certainty. Management and the Lead Arranger are both targeting end October 2016 for financial close. Assuming financial close occurs on or around the end of October 2016, construction of the mine would commence immediately thereafter and is scheduled for completion in September 2018 with first saleable coal production in the last quarter of 2018. The funding is subject to a number of conditions precedent, including Financing Syndicate credit committee approval and also delivery of take-or-pay offtake agreements securing revenues no less than those forecast in the Base Case Financial Model. Although the Company is fully focussed on securing the funding to be provided by the Financing Syndicate, as a contingency to cover any unforeseen delays in financial close, it has had advanced discussions with a related party to provide interim funding if required.

Notwithstanding this, should the Group not receive the additional funding referred to above there are material uncertainties as to whether the Company and the Consolidated Group will be able to continue as going concerns and therefore, whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in the annual financial report.

The annual financial report does not include adjustments relating to the recoverability and classification of recorded asset amounts nor to the amounts and classification of liabilities that might be necessary should the Company and the Consolidated Group not continue as going concerns.

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Notes to the consolidated financial statements continuedFor the year ended 30 June 2016

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

Basis of preparation

The consolidated financial statements have been prepared on the basis of historical cost, except for certain properties and financial instruments that are measured at revalued amounts or fair values at the end of each reporting period, as explained in the accounting policies below. Historical cost is generally based on the fair values of the consideration given in exchange for goods and services.

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, regardless of whether that price is directly observable or estimated using another valuation technique. In estimating the fair value of an asset or a liability, the Group takes into account the characteristics of the asset or liability if market participants would take those characteristics into account when pricing the asset or liability at the measurement date. Fair value for measurement and/or disclosure purposes in these consolidated financial statements is determined on such a basis, except for share-based payment transactions that are within the scope of AASB 2, leasing transactions that are within the scope of AASB 117 and measurements that have some similarities to fair value but are not fair value, such as net realisable value in AASB 102 or value in use in AASB 136.

In addition, for financial reporting purposes, fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are described as follows:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can assess at the measurement date;

• Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and

• Level 3 inputs are unobservable inputs for the asset or liability.

b) Principles of consolidationSubsidiaries including development partners

The consolidated financial statements incorporate the assets and liabilities of all subsidiaries of Resource Generation Limited as at 30 June 2016 and the results of all subsidiaries for the year then ended. Resource Generation Limited and its subsidiaries together are referred to in this financial report as the Group or the consolidated entity.

Control is achieved when the Company:

• has power over the investee;

• is exposed, or has rights, to variable returns from its involvement with the investee; and

• has the ability to use its power to affect its returns.

The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary. Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.

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Notes to the consolidated financial statements

c) Segment reportingThe Group has adopted a "management approach" under which segment information is presented on the same basis as that used for internal reporting purposes, consistent with the internal reporting provided to the Board.

d) Foreign currency translation(i) Functional and presentation currencyItems included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in Australian Dollars, which is Resource Generation Limited's presentation and functional currency.

(ii) Transactions and balancesIn preparing the financial statements of each individual group entity, transactions in currencies other than the entity's functional currency are recognised at the exchange rates prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not restated.

Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for:

• exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings;

• exchange differences on transactions entered into in order to hedge certain foreign currency risks; and

• exchange differences on monetary items receivable from or payable to a foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit and loss on repayment of the monetary items.

Foreign exchange differences reflect the movement of the exchange rate between the Australian Dollar and the South African Rand. The exchange rate at 30 June 2016 was 10.993 (2015: 9.373).

(iii) Group companiesThe results and financial position of the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

• Assets and liabilities for each balance sheet are translated at the closing rate at the date of that balance sheet;

• Income and expenses for each statement of comprehensive income are translated at average exchange rates over the period (unless this is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and

• All resulting exchange rate differences are recognised in other comprehensive income and accumulated in equity.

On consolidation, exchange rate differences arising from the translation of any net investment in foreign entities, and of borrowings and other financial instruments designated as hedges of such investments, are recognised in other comprehensive income. When a foreign operation is sold or any borrowings forming part of the net investment are repaid, a proportionate share of such exchange differences are recognised in the profit or loss, as part of the gain or loss on sale where applicable.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entities and translated at the closing rate.

e) Revenue recognitionRevenue is measured at the fair value of the consideration received or receivable. Interest revenue is recognised on a time proportional basis using the effective interest method.

Interest income from a financial asset is recognised when it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably. Interest income is accrued on a time basis by reference to the principal outstanding and at the effective interest rate applicable, which is at the rate that exactly discounts future cash receipts through the expected life of the financial asset to that asset's net carrying value on initial recognition.

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f) Income taxThe income tax expense or revenue for the period is the tax payable on the current period's taxable income based on the applicable income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and to unused tax losses.

The current income tax charge is calculated on the basis of tax laws at the end of the accounting period in the countries where the Group operates and generates taxable income. Management periodically evaluates positions taken where the tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liability settled, based on those tax rates which are enacted or substantially enacted. The relevant tax rates are applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising on initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss.

Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be available to utilise those temporary differences and losses.

Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in controlled entities where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the foreseeable future.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

The Directors have not recognised any deferred tax assets in relation to carry forward unused tax losses. Given the history of operating losses the Directors have determined that the most appropriate time to recognise deferred tax assets from carry forward unused tax losses is when the mine commences production.

g) Cash and cash equivalentsFor cash flow statement presentation purposes, cash and cash equivalents includes cash on hand, deposits held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities on the balance sheet.

h) Impairment of assetsAssets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more frequently if events or changes in circumstances indicate that the carrying amount may not be recoverable. Other assets such as mining tenements and mining development are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows which are largely independent of the cash flows from other assets or groups of assets (cash generating units).

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but only to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised in profit and loss immediately.

The above principles of impairment also apply to mining tenements.

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i) Trade and other payablesThese amounts represent liabilities for goods and services provided to the Group prior to the end of the financial period, which are unpaid. The amounts are unsecured and usually paid within 30 days of recognition.

j) ProvisionsProvisions are recognised when the Group has a present legal or constructive obligation as a result of past events, for which it is probable that an outflow of resources will be required to settle the obligation and the amount of the outflow can be reliably measured. Provisions are not recognised for future operating losses.

Provisions are measured at the present value of management's best estimate of the expenditure required to settle the present obligation at the reporting date. The discount rate used to determine the present value reflects current market assessments of the time value of money and the risks specific to the liability. The increase in the provision due to the passage of time is recognised as an interest expense.

k) Contributed equityOrdinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction from the proceeds.

l) Earnings per share(i) Basic earnings per share ("EPS") is calculated by dividing the result attributable to equity holders of the Group by the weighted

average number of shares outstanding during the year.

(ii) Diluted earnings per share adjusts the figures used to determine EPS to take into account:

• the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares; and

• the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential ordinary shares.

m) Goods and services tax (GST) and value-added tax (VAT)Revenues, expenses and assets are recognised net of the amount of GST, except where the amount of GST incurred is not recoverable from the Australian Taxation Office. In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables in the balance sheet are shown inclusive of GST. The net amount of GST recoverable from the taxation authority is shown as a receivable in the balance sheet.

Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or payable to the taxation authority, are presented as operating cash flows.

The treatment for VAT, in relation to offshore entities, is consistent with the treatment of GST.

n) DividendsProvision is made for the amount of any dividend declared, being appropriately authorised and no longer at the discretion of the entity, on or before the end of the financial year, but not distributed at balance date. No dividends were paid or proposed to be paid to members during the current year.

o) Property, plant and equipmentProperty, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity of any gains/losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment and borrowing costs capitalised during the construction of a qualifying asset.

The cost of improvements to or on leasehold properties is amortised over the unexpired period of the lease or the estimated useful life of the improvements, whichever is shorter.

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Depreciation on assets is calculated on a straight-line basis to allocate their cost, net of their residual values, over their useful estimated lives as follows:

Plant and equipment 4 – 25 years, depending on the nature of the asset

Computer equipment 2 – 5 years

Office equipment 1 – 10 years

Motor vehicles 5 years

Leasehold improvements 5 years

The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each reporting date. An asset's carrying amount is written down immediately to its recoverable amount if the asset's carrying amount is greater than its estimated recoverable amount (Note 1 h).

p) Employee benefits(i) Short-term and long-term employee benefitsA liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave, long service leave and sick leave when it is probable that settlement will be required and they are capable of being measured reliably.

Liabilities recognised in respect of short-term employee benefits, are measured at their nominal values using the remuneration rate expected to apply at the time of settlement.

Liabilities recognised in respect of long-term employee benefits are measured as the present value of the estimated future cash outflows to be made by the Group in respect of services provided by employees up to reporting date.

(ii) Retirement benefit obligationsContributions to superannuation funds by the consolidated entity are expensed in the year they are paid or become payable.

q) Share-based paymentsShare-based compensation benefits are provided to employees via the Resource Generation Limited Employee Share Plan.

The fair value of performance share rights granted under the Resource Generation Limited Employee Share Plan is recognised as an employee benefit expense with a corresponding increase in equity. The assessed fair value at grant date of performance share rights granted to individuals is allocated equally over the period from grant date to vesting date. The value attached to the performance share rights is the share price on the day of issue.

For options issued and approved by shareholders, fair values at grant date are determined using a binomial pricing model that takes into account exercise price, the term of the option, the impact of dilution, the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.

r) LeasesLeases of property, plant and equipment where the Group, as lessee, has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease's inception at the fair value of the leased property or, if lower, the present value of the minimum lease payments. The corresponding rental obligations, net of finance charges, are included in other short-term and long-term payables. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit and loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases are depreciated over the asset's useful life and the lease term if there is no reasonable certainty that the Group will obtain ownership at the end of the lease term.

Leases in which a significant portion of the risks and rewards of ownership are not transferred to the Group as lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit and loss on a straight-line basis over the period of the lease.

Lease income from operating leases where the Group is a lessor is recognised in income on a straight-line basis over the lease term.

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s) Investments and other financial assets(i) Classification

The Group classifies its financial assets in the following categories: financial assets at fair value through profit and loss, loans and receivables, held-to-maturity investments and available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments at initial recognition and, in the case of assets classified as held to maturity, re-evaluates the designation at each reporting date.

• Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortised cost using the effective interest rate method. Loans and receivables are included in trade and other receivables (Note 8).

(ii) Derecognition

Financial assets are derecognised where the contractual right to receipt of cash flows expires or the asset is transferred to another party, whereby the entity no longer has any significant continuing involvement in the risks and benefits associated with the asset. Financial liabilities are derecognised where the related obligations are either discharged, cancelled or expire. The difference between the carrying value of the financial liability extinguished or transferred to another party and the fair value of consideration paid, including the transfer of non-cash assets to liabilities assumed, is recognised in profit or loss.

(iii) Impairment

The Group assesses at each balance date whether there is objective evidence that a financial asset or group of financial assets is impaired. In the case of equity securities classified as available-for-sale, significant or prolonged decline in the fair value of a security below its costs is considered as an indicator that the security is impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss (measured as the difference between the acquisition costs and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss) is removed from equity and recognised in the profit and loss. Impairment losses recognised in the profit and loss on equity instruments classified as available-for-sale are not reversed through the profit and loss.

If there is evidence of impairment for any of the Group's financial assets carried at amortised cost, the loss is measured as the difference between the asset's carrying amount and the present value of estimated future cash flows, excluding future credit losses that have not been incurred. The cash flows are discounted at the financial asset's original effective interest rate. The loss is recognised in the profit and loss.

t) Borrowing costsBorrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

u) Comparative figuresWhen required by accounting standards, comparative figures have been adjusted to conform to changes in presentation for the current financial year.

v) New accounting standards and interpretationsIn the current year the Group has adopted all of the new and revised Standards and Interpretations issued by the Australian Accounting Standards Board (AASB) that are relevant to their operations and effective for the current year.

• AASB 2015-3 ‘Amendments to Australian Accounting Standards arising from the Withdrawal of AASB 1031 Materiality’. This amendment completes the withdrawal of references to AASB 1031 in all Australian Accounting Standards and Interpretations, allowing that Standard to effectively be withdrawn.

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The Company has reviewed the above Accounting Standards and determined that they have no material impact on the financial report for the year ended 30 June 2016.

w) Standards and Interpretations in issue not yet adoptedAt the date of authorisation of the financial statements, the Standards and Interpretations on issue but not yet effective are listed below. The impact of these has not been determined by the Group.• AASB 2015–1 Annual Improvements to Australian Accounting Standards 2012–2014 Cycle• AASB 2015–2 Disclosure Initiative: Amendments to AASB 101• AASB 2016–2 Amendments to Australian Accounting Standards – Disclosure Initiative: Amendments to AASB 107• AASB 9 Financial Instruments 2014• AASB 15 Revenue from Contracts with Customers• AASB 2014–5 Amendments to Australian Accounting Standards arising from AASB 15• AASB 2015–8 Amendments to Australian Accounting Standards – Effective date of AASB 15• AASB 2016–3 Amendments to Australian Accounting Standards – Clarifications to AASB 15• AASB 16 Leases

x) Parent entity financial informationThe financial information for the parent entity, Resource Generation Limited, disclosed in Note 30, has been prepared on the same basis as the consolidated financial statements, except as set out below.

• Investments in subsidiaries, associates and joint venturesInvestments in subsidiaries, associates and joint ventures are accounted for at cost in the financial statements of Resource Generation Limited. Dividends received from associates are recognised in the parent entity's profit or loss, rather than being deducted from the carrying amount of these investments.

y) Exploration and evaluation assetsExploration and evaluation costs are accumulated in respect of each separate area of interest. Exploration and evaluation costs are expensed as incurred and only carried forward where there is certainty that the right of tenure of the area of interest is current and they are expected to be recouped through sale or successful development and exploitation of the area of interest.

Once the technical feasibility and commercial viability of the area of interest are demonstrable, all carrying costs in respect of that area of interest are transferred to mining tenements and mining development.

When an area of interest is abandoned or the Directors decide that it is not commercially viable, any accumulated costs in respect of that area are written off in the financial year the decision is made. Each area of interest is also reviewed at the end of each accounting year and accumulated costs impaired to the extent that they will not be recoverable in the future.

z) Mining tenements and mining developmentMining tenement and mining development costs are accumulated in respect of each mine. Carried costs include exploration and evaluation costs which have been transferred once the technical feasibility and commercial viability of the related mine is established (see accounting policy y). Development costs and overhead costs that are directly attributable to the mine development are also capitalised, together with borrowing costs incurred during the construction of the mine (see accounting policy t).

Development costs related to a mine are carried forward to the extent that they are expected to be recouped either through sale or successful exploitation of the mine.

When a mine is abandoned or the Directors decide that it is not commercially viable, any accumulated costs in respect of that area are written off in the financial year the decision is made. Each mine is also reviewed at the end of each accounting year and accumulated costs impaired to the extent that they will not be recoverable in the future. Mining tenements are recognised at cost, after provision for impairment.

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2. FINANCIAL RISK MANAGEMENTThe Group's activities expose it to a variety of financial risks: market risk (including interest rate risk, foreign currency risk and price risk), credit risk and liquidity risk. The Group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the Group.

Risk management is carried out by the Board of Directors and management under policies approved by the Board. The Board and management identify and evaluate financial risks and provide principles for overall risk management.

a) Market risk(i) Interest rate risk

The Group is not exposed to any material interest rate risk as the Noble USD borrowing is fixed at 10.75% per annum. Interest on the EHL borrowing is payable at the ABSA Bank prime lending rate plus 3%. A 10% movement in the interest rate would result in an increase/decrease in development costs of $0.1 million (2015: $0.1 million).

(ii) Foreign currency risk

The Group operates internationally and is exposed to currency exposures in respect of the South African Rand in relation to the development and exploration activities in South Africa and the US Dollar in respect of borrowings. Foreign exchange risk is managed through the holding of cash deposits in both South African Rand and US Dollar to match forecast expenditure over the near term. The foreign exchange exposure is not hedged.

If the South African Rand weakened/strengthened against the Australian Dollar by 10% since 30 June 2016 the impact on the Group's net loss after tax would amount to $0.6 million (2015 : $nil). If the South African Rand weakened/strengthened against the US Dollar by 10% since 30 June 2016 the impact on the Group's net loss after tax due to retranslation of the US Dollar borrowings would amount to $3.4 million (2015 : $2.9 million). Other components of equity would not have been affected, with the exception of the foreign currency translation reserve which would have been increased/decreased by $6.8 million (2015: $2.2 million) with a 10% movement in the South African Rand against the Australian Dollar.

The Group's exposure to foreign currency risk at the reporting date was as follows:

2016 2015Rand Rand’000 ’000

Cash at Bank (South Africa & Mauritius) 12 499 43 960

VAT Receivable 1 139 1 639

Mining related licence deposits 20 437 18 002

Royalty payable 21 395 30 000

Creditors and accruals 75 252 50 976

Borrowings 67 043 41 164

USD USD’000 ’000

Cash at Bank 8 000 13 978


(iii) Price risk

The Group is not exposed to equity securities price risk as it holds no investments in securities classified on the balance sheet either as available-for-sale or at fair value through profit or loss. The Group is exposed to commodity price risk to the extent it relates to funding activities.

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2. FINANCIAL RISK MANAGEMENT continued

b) Credit riskThe maximum exposure to credit risk, excluding the value of any collateral or other security, at balance date to recognised financial assets, is the carrying amount, net of any provisions for impairment of those assets, as disclosed in the balance sheet and notes to the financial statements.

The Group has no material credit risk exposure to any single receivable or receivables under financial instruments entered into by the Group.

Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions. For banks and financial institutions only independently rated parties with a minimum rating by Standard & Poors of "A" are accepted.

c) Liquidity riskPrudent liquidity risk management implies maintaining sufficient cash to meet commitments as and when they fall due. Cash flow forecasting monitors liquidity requirements. The Group has $7.0 million (2015: $7.3 million) in trade and other payables as at 30 June 2016, all of which are due within six months.

d) Cash flow and fair value interest rate riskAs the Group has no variable interest-bearing liabilities, its income and operating cash flows are not materially exposed to changes in market interest rates. The Group has $11.9 million (2015: $28.4 million) in interest bearing accounts which is subject to movements in interest rates. At the current level of interest rates, any risk is considered minimal.

e) Fair value estimationIn estimating the fair value of an asset or a liability, the Group uses market-observable data to the extent it is available. Where Level 1 inputs are not available, the Group engages third party qualified valuers to perform the valuation.

3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTSThe preparation of financial statements in conformity with Australian Accounting Standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group's accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed below.

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that may have a financial impact on the entity and that are believed to be reasonable under the circumstances. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

The accounting policies and methods of computation adopted in the preparation of the financial report are consistent with those adopted and disclosed in the Company's financial report for the year ended 30 June 2015. These accounting policies are consistent with Australian Accounting Standards and with International Financial Reporting Standards.

Development expenditure Development expenditure incurred by or on behalf of the consolidated entity is accumulated separately for each mine in which economically recoverable reserves have been identified to the satisfaction of the Directors. Such expenditure comprises direct costs plus overhead expenditure incurred which can be directly attributable to the development process, in accordance with AASB 116 'Property, Plant & Equipment'.

All expenditure incurred prior to the commencement of commercial levels of production from each area of interest is carried forward to the extent which recoupment out of revenue to be derived from the sale of production from the area of interest, or by its sale, is reasonably assured. Once commercial levels of production commence, the development expenditure in respect of that area of interest will be depreciated on a straight-line basis, based upon an estimate of the life of the mine.


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Expenditure on the Boikarabelo Coal Mine has been fully capitalised as per Note 11. The Group is confident of the full recovery of the expenditure on the Boikarabelo Coal Mine on the basis of the financial modelling of the mine incorporating forecast production, sales levels and capital expenditure. This model is updated regularly and used to assess whether an impairment provision is required. Based on the current critical estimates and judgements, the Directors do not believe that an impairment provision is required.

Restatement of accountsThe accounts have been restated in respect of the accounting for loans to the Group's BEE partner and also accounting for foreign exchange on acquisition adjustments.

(i) Loan to BEE partner

In 2011, the Group loaned its Black Economic Empowerment (BEE) partner, Fairy Wing Trading 136 (Pty) Limited (Fairy Wing), R80 million ($7.3 million) to facilitate its 26% acquisition of Ledjadja Coal (Pty) Limited (Ledjadja). In 2013, an additional R39 million ($3.5 million) was loaned to Fairy Wing, to fund its 26% acquisition of Waterberg One Coal (Pty) Limited (Waterberg One). The loans are secured over Fairy Wing’s shares in Ledjadja and Waterberg One and are repayable out of future dividends. Interest on the loans was deferred from 1 January 2014 until commencement of coal production at the Boikarabelo Coal Mine at which time interest will be payable at the prime rate quoted by Standard Bank of South Africa plus 3%.

Guidance from the South African Institute of Chartered Accountants in respect of accounting for BEE transactions, which is consistent with AASB 2 Share-based Payment, indicates that loans to BEE partners made on non-commercial terms should be treated as share-based payments. In light of this guidance and having regard to the terms of the Fairy Wing loans, including the fact that they are secured over Fairy Wing’s shares in the respective subsidiaries and are in substance only repayable out of future dividends from coal production, the directors have concluded that instead of recognising loan receivables at inception, the financial statements should have reflected a charge to profit and loss.

The restatement in relation to this reverses the previously recorded loan carrying values, including accrued interest, against retained earnings. It also includes the related impact on the foreign currency translation reserve.

(ii) Foreign exchange on acquisition adjustments

The Group previously acquired interests in South African subsidiaries that held exploration licences for the Boikarabelo Coal Mine project. The difference between the net assets of the subsidiaries acquired and the purchase consideration was recorded as an exploration asset, subsequently reclassified to mining tenements and mining development assets. Such differences should be treated as assets of the foreign operation and therefore foreign exchange differences arising on translation of these assets for consolidation purposes shall be recorded in the foreign currency translation reserve.

The restatement reflects this accounting. The reduction of the mining tenement and mining development asset balance reflects the weakening of the South African rand against the Australian dollar.

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3. CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS continued

30 JUNE 2015

As previously stated Restatement As restated$’000 $’000 $’000

Consolidated statement of financial position

Deposits and loan receivables 18 484 (15 546) 2 938

Mining tenements and mining development 140 539 (11 225) 129 314

Total non-current assets 194 487 (26 771) 167 716

TOTAL ASSETS 223 445 (26 771) 196 674

Equity 223 622 – 223 622

Reserves (2 529) (9 288) (11 817)

Accumulated losses (42 757) (17 483) (60 240)

TOTAL EQUITY 178 336 (26 771) 151 565

30 JUNE 2016

As previously stated Restatement As restated

$’000 $’000 $’000

Consolidated statement of financial position

Deposits and loan receivables 16 923 (14 616) 2 307

Mining tenements and mining development 103 530 (13 788) 89 742

Total non-current assets 153 820 (28 404) 125 416

TOTAL ASSETS 208 711 (28 404) 180 307

Equity 223 622 – 223 622

Reserves (10 090) (10 921) (21 011)

Accumulated losses (37 808) (17 483) (55 291)

TOTAL EQUITY 175 724 (28 404) 147 320

4. SEGMENT INFORMATIONDescription of operating segmentsManagement has determined the segments based upon reports reviewed by the Board that are used to make strategic decisions. The Board considers the business from both a business and geographic perspective, with the Board being the chief operating decision maker.

The Group has coal interests in South Africa. The main priority is to develop its coal resources in the Waterberg region of South Africa. Management has determined that there is one operating segment, being mining tenements and mining development. Unallocated corporate administration reflects other corporate costs and includes equity raisings and administration costs.


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Segment revenues and resultsSEGMENT REVENUE SEGMENT (LOSS)/PROFIT

2016 2015 2016 2015$’000 $’000 $’000 $’000

Mining tenements and mining development 243 454 (629) (6 791)

Corporate – unallocated 36 223 (7 028) 1 842

Total for continuing operations 279 677 (7 657) (4 949)

Segment revenue is primarily interest income as disclosed in Note 5.

The accounting policies of the reportable segments are the same as the Group's accounting policies described in Note 1. The mining tenements and mining development segment loss represents the loss earned by that segment without allocation of central administration costs and salaries, share of profits of associates, gains and losses, finance costs and income tax expense, all of which are included in the corporate segment. This is the measure reported to the chief operating decision maker for the purposes of resource allocation and assessment of segment performance.

Segment asset and liabilities2016 2015

$’000 $’000

Segment assets

Mining tenements and mining development 162 114 172 607

Corporate – unallocated 11 029 24 067

173 143 196 674

Segment liabilities


Corporate – unallocated 301 1 213

50 691 45 109

Other segment informationDEPRECIATION AND

AMORTISATIONADDITIONS TO PROPERTY, PLANT AND EQUIPMENT

2016 2015 2016 2015$’000 $’000 $’000 $’000


Corporate – unallocated 25 47 33 45

Total 334 404 537 376

Other segment information – mining tenements and mining developmentADDITIONS

2016 2015$’000 $’000


Corporate – unallocated – –

20 025 32 393

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4. SEGMENT INFORMATION continued

Geographical informationREVENUE FROM

EXTERNAL CUSTOMERS NON–CURRENT ASSETS

2016 2015 2016 2015$’000 $’000 $’000 $’000

Australia 36 223 39 52

South Africa 243 454 160 829 167 664

279 677 160 868 167 716

5. TOTAL REVENUECONSOLIDATED

2016 2015$’000 $’000

Revenue from continuing operations

Interest earned 210 677

210 677

Other

Other 69 –

69 –

Total 279 677


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6. INCOME TAX EXPENSECONSOLIDATED

2016 2015$’000 $’000

Income tax expense

Current tax 1 5

Deferred tax – –

Under/(over) provided in prior years – –

1 5

Income tax expense is attributable to:

Profit/(loss) from continuing operations 1 5

Loss from discontinued operations – –

Aggregate income tax expense 1 5

Deferred income tax expense included in income tax expense comprises:

Decrease/(increase) in deferred tax assets – –

(Decrease)/increase in deferred tax liabilities – –

– –

Numerical reconciliation of income tax expense to prima facie tax payable

Loss from continuing operations before income tax expense (7 656) (4 944)

Tax charge at the Australian rate of 30% – –

Tax benefit at the Australian rate of 30% (2 297) (1 483)

Tax effect of amounts which are not (taxable)/deductible in calculating taxable income:

Share-based payments (572) 239

Income tax benefit not recognised 2 870 1 249

Income tax expense 1 5

Tax losses

Unused tax losses for which no deferred tax asset has been recognised 16 338 10 928

Potential tax benefit at Australian tax rate of 30% 4 901 3 278

The Directors have not recognised any deferred tax assets in relation to carry forward unused tax losses. Given the history of operating losses the Directors have determined that the most appropriate time to recognise deferred tax assets from carry forward unused tax losses is when the mine commences production.

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7. CURRENT ASSETS – CASH AND CASH EQUIVALENTSCONSOLIDATED

2016 2015$’000 $’000

Cash at bank and in hand 11 955 28 551

11 955 28 551

8. CURRENT ASSETS – TRADE AND OTHER RECEIVABLESCONSOLIDATED

2016 2015$’000 $’000

Receivables 9 1

Government tax refunds 137 199

146 200

9. CURRENT ASSETS – DEPOSITS AND PREPAYMENTSCONSOLIDATED

2016 2015$’000 $’000

Prepayments 9 54

Deposits 165 153

174 207

10. NON-CURRENT ASSETS – PROPERTY, PLANT AND EQUIPMENTCONSOLIDATED

Land and Buildings

ComputerEquipment

OfficeEquipment

Motor Vehicles Total

$’000 $’000 $’000 $’000 $’000

Opening net book value 01 July 2014 32 396 114 152 705 33 367

Additions 56 165 20 135 376

Disposals – – – (75) (75)

Depreciation (4) (150) (36) (214) (404)

Effect of foreign exchange differences 2 066 25 (7) 116 2 200

Closing net book value 30 June 2015 34 514 154 129 667 35 464

Additions – 244 15 278 537

Disposals – (19) – (48) (67)

Depreciation (14) (105) (34) (181) (334)

Effect of foreign exchange differences (5 086) (12) (18) (119) (5 235)


Assets at cost 29 444 499 181 1 040 31 164

Accumulated depreciation (30) (237) (89) (443) (799)



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11. NON-CURRENT ASSETS – MINING TENEMENTS AND MINING DEVELOPMENTCONSOLIDATED

2016

2015 2014

Restated* Restated*$’000 $’000 $’000

Mining tenements and mining development 128 644 129 314 89 742

The Boikarabelo Coal Mine

Mining tenements of 100% of Resgen Africa Holdings Limited

Opening net book value 89 262 52 517 30 772

Additions/movements 20 025 32 913 25 484

Effect of foreign exchange differences (13 800) 3 832 (3 739)

Closing net book value 95 487 89 262 52 517

Mining tenements of 100% of Resgen South Africa (Pty) Limited

Opening net book value 40 052 37 225 41 476

Additions/movements – (520) 649

Effect of foreign exchange differences (6 895) 3 347 (4 900)

Closing net book value 33 157 40 052 37 225

Total Boikarabelo Coal Mine 128 644 129 314 89 742

Carrying value at year end 128 644 129 314 89 742

The Boikarabelo Coal Mine is the name given to the project for the development of the coal tenements in South Africa. It incorporates the assets acquired and development expenditure for Resgen Africa Holdings Limited and Resgen South Africa (Pty) Limited, including tenements held by Ledjadja Coal (Pty) Limited and Waterberg One Coal (Pty) Limited. The realisation of the assets of the Boikarabelo Coal Mine is dependent upon the successful development of the coal reserves.


12. NON-CURRENT ASSETS – DEPOSITS AND LOAN RECEIVABLESCONSOLIDATED

2015 2014

2016 Restated* Restated*

$’000 $’000 $’000

Mining related licence deposits 1 859 2 007 1 618

Other – 931 689

1 859 2 938 2 307


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13. CURRENT LIABILITIES – TRADE AND OTHER PAYABLESCONSOLIDATED

2016 2015$’000 $’000

Trade payables 1 515 2 746

Other payables – accrued expenditure 5 452 4 574

6 967 7 320

14. CURRENT LIABILITIES – PROVISIONSCONSOLIDATED

2016 2015$’000 $’000

Employee benefits – annual leave and sick leave 180 987

180 987

15. NON-CURRENT LIABILITIES – PROVISIONS CONSOLIDATED

2016 2015$’000 $’000

Employee benefits – long service leave – 204

Rehabilitation provision 1 983 –

1 983 204

16. NON-CURRENT LIABILITIES – ROYALTIES PAYABLECONSOLIDATED

2016 2015$’000 $’000

Royalties payable 1 946 2 716

1 946 2 716

Royalties are payable upon the commencement of coal production and were recognised on acquisition. The royalty is calculated on the basis of R2.00 per tonne of coal extracted and sold from the Boikarabelo Coal Mine to a maximum of 15.0 million tonnes. The royalty payable is discounted to present value in line with anticipated production, using a discount rate of 9% (2015: 4%).

17. CURRENT LIABILITIES – BORROWINGSCONSOLIDATED

2016 2015$’000 $’000

EHL loan 1 877 1 802

Noble loan 2 010 859

3 887 2 661


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EHL loan

EHL Energy (Pty) Limited is building the electricity sub-station at the Boikarabelo Coal Mine which connects the mine to the grid. The construction is subject to a deferred payment plan, with interest payable at the ABSA Bank prime lending rate plus 3%. The loan is unsecured and repayable in 16 quarterly instalments from November 2015. There were 13 quarterly instalments remaining to be paid as at 30 June 2016.

Noble loan

US$20 million was drawn down as an unsecured loan from Noble Resources International Pte Ltd in March 2014. It is repayable in quarterly instalments of capital and interest over 8 years and has an annual interest rate of 10.75%. The first repayment instalment of the loan is due in February 2017.

18. NON-CURRENT LIABILITIES – BORROWINGS CONSOLIDATED

2016 2015$’000 $’000

EHL loan 4 222 2 590

Noble loan 31 506 28 631

35 728 31 221

19. CONTRIBUTED EQUITYCONSOLIDATED

2016 2015Shares Shares

a) Share Capital

Ordinary shares issued 581 380 581 380

CONSOLIDATED

2016 2015$’000 $’000

Contributed equity 223 622 223 622

Total equity 223 622 223 622

b) Ordinary shares

Ordinary shares entitle the holder to participate in dividends and the proceeds on winding up of the Company in proportion to the number of and amounts paid on the shares held. On a show of hands, every holder of ordinary shares present in person or by proxy is entitled to one vote and, upon a poll, each share is entitled to one vote.

Ordinary shares have no par value and the Company does not have a limited amount of authorised capital.

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19. CONTRIBUTED EQUITY continued

c) Treasury shares – JSE clearing shares

In order to facilitate the secondary listing on the Johannesburg Stock Exchange (JSE), the Company was required to issue shares as a guarantee to ensure no trades failed. A subsidiary trustee company was established, Resgen Scrip Lending Pty Limited, and the 5 million shares were issued on 25 June 2010 at $0.50 each. The listing on the JSE was completed on 14 July 2010. As there is now a sufficient spread of shares on the South African register, the JSE Clearing shares are no longer required and arrangements will be made to deal with the shares in the interests of all shareholders once project funding for mine development is secured.

Date Details

Number of shares

’000Amount

$’000

2015/06/30 Opening balance 4 205 2 317

Movement in treasury shares – –

2016/06/30 Balance 4 205 2 317

d) 2016

There were no equity movements during the current financial year.

Employee share scheme issues

Employee share scheme information, including details of shares issued under the scheme, is set out in note 19 g).

e) Share-based payment reserve

Number of options/

rights

Number of options/

rights

Number ofoptions/

rights

Number ofoptions/

rights

2016 2016 2015 2015 ’000 $’000 ’000 $’000

Options

Options granted previously and expired – 17 682 – 17 682

Transfer of option premium reserve to earnings – (17 682) – –

Closing balance – – – 17 682

Performance share rights

Opening balance 21 700 2 612 24 700 1 815

Employee share plan expense – apportionment of share rights over entitlement period – (33) 500 1 547

Performance rights forfeited* (15 450) (1 873) (3 500) (750)

Closing balance 6 250 706 21 700 2 612

Total options and performance share rights 6 250 706 21 700 20 294

* Performance share rights forfeited in respect of termination of employment. Performance hurdles in respect of these share rights related to milestones during construction and initial coal production.

f) Movement in options

There are no options on issue as at 30 June 2016. All previously issued options expired by 30 June 2014.


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g) Movement in performance share rights

Number of rights

Issue price Amount

Date Details ’000 $ $’000

2014/06/30 Balance 24 700 – 1 815

2015/01/01 Performance rights forfeited (3 500) – (750)

2015/06/30 Performance rights issue 500 – –

2015/06/30 Share-based compensation – – 1 547

2015/11/25 Performance rights forfeited (15 450) – (1 873)

2016/06/30 Share-based compensation – – (33)

2016/06/30 Balance 6 250 – 706

As at 30 June 2016 there are 7 holders of the total performance share rights of 6.25 million. There are no voting rights attached to performance share rights.

Performance share rights are granted under the long-term incentive plan for no consideration. Performance share rights vest over periods ranging from one to five years with non-market based performance hurdles determined by the Executive’s role and responsibilities. The performance hurdles are linked to key development milestones. For the performance rights current as at 30 June 2016 (as approved by the previous Board), the performance hurdles include the following:

i) Funding to enable all material construction, expected during the 2017 financial year.

ii) Production of the first 100,000 tonnes of ROM coal, expected during the 2019 financial year.

20. RESERVES AND ACCUMULATED LOSSESCONSOLIDATED

2015 20142016 Restated* Restated*

$’000 $’000 $’000

a) Reserves

Other contributed equity 1 085 1 085 1 085

Treasury shares – refer Note 19 c) (2 317) (2 317) (2 317)

Share-based payment reserve 706 20 294 19 497

Foreign currency translation reserve (50 429) (30 879) (39 276)

(50 955) (11 817) (21 011)

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CONSOLIDATED

2015 20142016 Restated* Restated*

$’000 $’000 $’000

Movement in reserves

Share-based payment reserve

Opening balance 20 294 19 497 17 862

Transfer to accumulated losses1 (17 682) – –

Employee share plan (credit)/expense (1 906) 797 1 635

Balance at the end of the year 706 20 294 19 497

Foreign currency translation reserve

Opening balance (30 879) (39 276) (26 478)

Movement for the period2 (19 550) 8 397 (12 798)

Balance at the end of the year (50 429) (30 879) (39 276)

* Please refer to Note 3 ‘Critical accounting estimates and judgements’.1 The transfer from share-based payment reserve represents the reserve amount that was created in respect of share options issued in prior years. With no options

currently in issue, the reserve has been transferred to accumulated losses.2 Foreign currency translation reserve movements arise from a 17% depreciation of the Rand against the Australian Dollar during the year ended 30 June 2016

(2015: 6% appreciation).

CONSOLIDATED

2016 2015$’000 $’000

b) Accumulated losses

Opening balance (60 240) (55 291)

Transfer from share-based payment reserve1 17 682 –


Balance at the end of the year (50 215) (60 240)

1 Refer note 20 a) above.

21. REMUNERATION OF AUDITORSDuring the year the following fees were paid or are payable for services provided by the auditor of the Company:

CONSOLIDATED

2016 2015$ $

a) Audit and review of financial reports 118 125 105 604

b) Other services

Taxation and JSE sponsor services (South Africa) 21 276 41 842

Corporate consulting (South Africa) 8 551 29 208

29 827 71 050

It is the Company’s policy to employ the auditor on assignments additional to their statutory audit duties where the auditor’s expertise and experience with the Company are important. Deloitte Touche Tohmatsu has been awarded these assignments on a competitive basis. It is the Company’s policy to seek competitive tenders for all major material consulting projects.


20. RESERVES AND ACCUMULATED LOSSES continued

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22. RELATED PARTY TRANSACTIONSa) Key management personnel

Disclosures relating to key management personnel are set out in detail in the remuneration disclosures to the Directors’ Report.

CONSOLIDATED

2016 2015$ $

Short-term employee benefits 2 243 441 2 280 512

Long-term benefits (superannuation) 59 083 111 067

Long-term benefits (long service leave) 90 924 158 957

Termination benefits 1 784 296 –

4 177 744 2 550 536

Share-based payments (1 856 136) 715 891

Total remuneration for key management personnel 2 321 608 3 266 427

b) Parent entities

The parent entity within the Group is Resource Generation Limited, and this is the ultimate parent company.

c) Subsidiaries

Interests in subsidiaries are set out in Note 23.

d) Related parties

The Group has borrowings of US$20 million plus accrued interest of US$4.9 million from Noble International Resources Pte Limited (Noble). Noble has a 13.69% shareholding in the Company as at 30 June 2016 (2015: 13.69%).

23. SUBSIDIARIESThe consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in note 1 b).

EQUITY HOLDING

Name of entityCountry of incorporation

Class of shares

2016%

2015%

Resgen Mauritius Limited Mauritius Ordinary 100 100

Resgen South Africa (Pty) Ltd – owned 100% by Resgen Mauritius Limited South Africa Ordinary 100 100

Waterberg One Coal (Pty) Limited – owned 74% by Resgen South Africa (Pty) Limited South Africa Ordinary 74 74

Resgen SA Farms (Pty) Limited – owned 100% by Resgen South Africa (Pty) Limited South Africa Ordinary 100 100

Resgen Africa Holdings Limited Mauritius Ordinary 100 100

Ledjadja Coal (Pty) Limited – owned 74% by Resgen Africa Holdings Limited South Africa Ordinary 74 74

Resgen Share Plan Pty Limited Australia Ordinary 100 100

Resgen Scrip Lending Pty Limited Australia Ordinary 100 100

The parent company is Resource Generation Limited. The subsidiaries are controlled by Resource Generation Limited and the subsidiaries are fully consolidated from the date on which control passed to the Group.

The minority interest in Ledjadja Coal (Pty) Limited and Waterberg One Coal (Pty) Limited is held by Fairy Wing Trading 136 (Pty) Limited (Fairy Wing), the Group’s Black Economic Empowerment (BEE) partner. Pursuant to the terms of a loan from the Group to facilitate the acquisition of the shares, Fairy Wing only nominally holds the minority interest and is not currently entitled to a share in the residual interest of the subsidiaries. For this reason, a non-controlling interest is not presented in the consolidated financial statements.

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24. DIVIDENDS There were no dividends recommended or paid during the financial year.

25. COMMITMENTSCONSOLIDATED

2016 2015$’000 $’000

a) Lease commitments for premises

Commitments in relation to leases contracted for at the reporting date but not recognised as liabilities, payable:

Within one year 272 282

Later than one year, but not later than 5 years 168 460

440 742

Representing:

Non-cancellable operating leases on premises 440 742

440 742

b) EHL Loan

Interest repayments under the EHL loan facility as disclosed in Notes 17 and 18:

Within one year 727 549

Later than one year, but not later than 5 years 716 6 053

1 443 6 602

c) Noble Loan

Interest repayments under the Noble loan facility as disclosed in Notes 17 and 18:

Within one year – 9

Later than one year, but not later than 5 years 3 959 9 671

Later than 5 years 3 204 –

7 163 9 680

d) Capital commitments

The Group has $5.4 million (2015: $4.8 million) in commitments in respect of the development of the Boikarabelo Coal Mine.

26. EVENTS OCCURRING AFTER THE REPORTING PERIODOn 8 August 2016, the Company announced that it had agreed the commercial terms on which a Financing Syndicate will seek their requisite approvals in order to secure funding of R5.52 billion ($515 million) to complete the construction of the Boikarabelo Coal Mine.

27. CONTINGENT LIABILITIESLand acquisitionThere is a potential property acquisition of $9.0 million (2015: $11.7 million) contingent to events subsequent to the commencement of mine production.


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28. RECONCILIATION OF LOSS AFTER INCOME TAX TO NET CASH OUTFLOW FROM OPERATING ACTIVITIESCONSOLIDATED

2016 2015$’000 $’000


Depreciation 334 404

Share-based compensation (credit)/expense (1 906) 797

Interest expense on loans – 2 729

Unrealised foreign exchange loss/(gain) 4 165 (1 070)

Changes in operating assets and liabilities:

Increase/(decrease) in trade and other payables (353) (221)

Increase/(decrease) in provisions – 365

(Increase)/decrease in trade and other receivables 235 –

Net cash outflow from operating activities (5 182) (1 945)

29. EARNINGS PER SHARECONSOLIDATED

2016 2015Cents Cents

a) Basic earnings per share

Loss from continuing operations attributable to the ordinary equity holders of the Company (1.3) (0.9)

Total basic earnings per share attributable to the ordinary equity holders of the Company (1.3) (0.9)

b) Diluted earnings per share


Total diluted earnings per share attributable to the ordinary equity holders of the Company (1.3) (0.9)

c) Headline earnings per share


Total headline earnings per share attributable to the ordinary equity holders of the Company (1.3) (0.9)

d) Reconciliation of earnings used in calculating earnings per share

CONSOLIDATED

2016 2015$’000 $’000

Basic loss per share

Loss from continuing operations attributable to the ordinary equity holders of the Company (7 657) (4 949)

Diluted loss per share


Headline loss per share


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29. EARNINGS PER SHARE continued

e) Weighted average number of shares used as the denominator

CONSOLIDATED

2016 2015

NUMBER OF SHARES

Weighted average number of ordinary shares used as the denominator in calculating basic and diluted earnings per share 577 174 838 577 174 838

Weighted average number of ordinary shares used as the denominator in calculating headline earnings per share 577 174 838 577 174 838

f) Information concerning the classification of securities

Performance share rightsPerformance share rights are considered to be potential ordinary shares and have been included in the determination of diluted earnings per share to the extent to which they are dilutive. The performance share rights have not been included in the determination of basic earnings per share.

30. PARENT ENTITY FINANCIAL INFORMATIONa) Summary financial information

The individual financial statements for the parent entity show the following aggregate amounts:

PARENT

2016 2015$’000 $’000

Balance sheet

Current assets

Cash and cash equivalents 10 818 23 860

Trade and other receivables 45 24

Deposits and prepayments 127 131

10 990 24 015

Non-current assets

Property, plant and equipment 39 52

Investments 74 069 74 069

Related party loans 100 385 108 142

174 493 182 263

Total assets 185 483 206 278

Current liabilities

Trade and other payables 302 170

Provisions – 1 044

302 1 214

Total liabilities 302 1 214

Net assets 185 181 205 064


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PARENT

2016 2015$’000 $’000

Shareholders’ equity

Contributed equity 223 622 223 622

Reserves

Share-based payment reserve 706 20 294

Other contributed equity 1 085 1 085

Accumulated losses (40 232) (39 937)

Total equity 185 181 205 064


Total comprehensive loss (17 979) (25 249)

b) Guarantees entered into by the parent entity

Post the commencement of operations there are performance obligations under the coal export offtake contracts. The repayments under the Noble and EHL loans have been guaranteed by the parent entity.

Letters of support have been provided to all subsidiaries to confirm that the parent entity will continue to provide financial support to enable them to continue in operation for 12 months from 30 August 2016. In addition, the parent entity has subordinated certain loan receivables owing by the subsidiary companies.

c) Contingent liabilities of the parent entity

The parent entity’s contingent liabilities are included in those disclosed at Note 27.

d) Contractual commitments for the acquisition of property, plant or equipment

As at 30 June 2016, the parent entity had no contractual commitments for the acquisition of property, plant or equipment.

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In the Directors’ opinion:

(a) the financial statements and notes set out on pages 53 to 56 are in accordance with the Corporations Act 2001, including:

(i) complying with accounting standards and the Corporations Regulations 2001; and

(ii) give a true and fair view of the consolidated entity’s financial position as at 30 June 2016 and of the performance for the financial year ended on that date;

(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable;

(c) Note 1 a) confirms that the financial statements also comply with International Financial Reporting Standards as issued by the International Accounting Standards Board; and

(d) the directors have been given the declarations by the Chief Executive Officer and the Chief Financial Officer required by section 295A of the Corporations Act 2001.

This declaration is made in accordance with a resolution of the Directors, made pursuant to section 295(5) of the Corporations Act 200

L XateDeputy Chairman

Johannesburg30 August 2016

Directors’ declaration For the year ended 30 June 2016

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Independent auditor’s report

Deloitte Touche Tohmatsu ABN 74 490 121 060

Riverside Centre Level 26 123 Eagle Street Brisbane QLD 4000 GPO Box 1463 Brisbane QLD 4001 Australia

Tel: +61 (0) 7 3308 7000 Fax: +61 (0) 7 3308 7001 www.deloitte.com.au

Independent Auditor’s Report to the members of Resource Generation Limited

We have audited the accompanying financial report of Resource Generation Limited, which comprises the consolidated statement of financial position as at 30 June 2016, the consolidated statement of profit or loss and other comprehensive income, the consolidated statement of cash flows and the consolidated statement of changes in equity for the year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity, comprising the company and the entities it controlled at the year’s end or from time to time during the financial year as set out on page 84.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that the consolidated financial statements comply with International Financial Reporting Standards.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control, relevant to the company’s preparation of the financial report that gives a true and fair view, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Auditor’s Independence Declaration

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001. We confirm that the independence declaration required by the Corporations Act 2001, which has been given to the directors of Resource Generation Limited, would be in the same terms if given to the directors as at the time of this auditor’s report.

Liability limited by a scheme approved under Professional Standards Legislation.

Member of Deloitte Touche Tohmatsu Limited.

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Opinion

In our opinion:

(a) the financial report of Resource Generation Limited is in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2016 and of its performance for the year ended on that date; and

(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and

(b) the consolidated financial statements also comply with International Financial Reporting Standards as disclosed in Note 1.

Emphasis of Matter

Without modifying our opinion, we draw attention to Note 1(a) in the financial report which indicates that the consolidated entity incurred a loss of $7.7 million (2015: $4.9 million) and used net cash in operating activities of $5.2 million (2015: $1.9 million) during the year ended 30 June 2016. These conditions, along with other matters as set out in Note 1(a), indicate the existence of a material uncertainty that may cast significant doubt about the ability of the company and the consolidated entity to continue as going concerns and therefore, the company and the consolidated entity may be unable to realise their assets and discharge their liabilities in the normal course of business.

Report on the Remuneration ReportWe have audited the Remuneration Report included on pages 41 to 50 of the Directors’ Report for the year ended 30 June 2016. The directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards.

Opinion

In our opinion the Remuneration Report of Resource Generation Limited for the year ended 30 June 2016, complies with section 300A of the Corporations Act 2001.

DELOITTE TOUCHE TOHMATSU

Matthew DonaldsonPartnerChartered AccountantsBrisbane

30 August 2016

Independent auditor’s report continued

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Rand accounts

SUPPLEMENTARY INFORMATION – TRANSLATION OF FINANCIAL INFORMATION TO THE SOUTH AFRICAN RANDThe presentation currency used in the preparation of the financial statements is the Australian Dollar (A$). The Group has translated the financial statements to the South African Rand (ZAR) because the Boikarabelo Coal Mine, which represents the Group’s most significant activity, is located in this region. This supplementary information has restated the financial statements to the Rand. Assets and liabilities were translated to Rand using the relevant closing rate of exchange and income and expense items were translated using the relevant cumulative average rate of exchange. The applicable rates used in the restatement of information are as follows:

2016 2015

Cumulative average rate of exchange (A$/ZAR) 10.5610 9.4870

Closing rate of exchange (A$/ZAR) 10.9930 9.3730

STATEMENTS OF COMPREHENSIVE INCOME – ZAR CONVENIENCE TRANSLATION (SUPPLEMENTARY INFORMATION)For the year ended 30 June 2016

CONSOLIDATED

2015

2016 Restated*R’000 R’000

Interest revenue 2 218 6 423

Other 729 –

2 947 6 423

Administration, rent and corporate (17 299) (10 957)

Depreciation of property, plant and equipment (3 527) (3 833)

Employee benefits expense (38 886) (15 236)

Finance expenses (232) (25 890)

Share-based compensation credit/(expense) 20 129 (7 561)

Unrealised foreign exchange movements (43 987) 10 150

Loss before income tax (80 855) (46 905)

Income tax expense (11) (47)

Loss from continuing operations (80 866) (46 952)


Other comprehensive (loss)/income (206 468) 79 662

Total comprehensive (loss)/income (287 334) 32 710

Loss is attributable to:

Owners of Resource Generation Limited (80 866) (46 952)

Total comprehensive (loss)/income for the year is attributable to:

Owners of Resource Generation Limited (287 334) 32 710

Loss per share for loss from continuing operations Cents Cents

Basic loss per share (13.7) (8.1)

Diluted loss per share (13.7) (8.1)


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Rand accounts continued

BALANCE SHEETS – ZAR CONVENIENCE TRANSLATION (SUPPLEMENTARY INFORMATION)As at 30 June 2016

CONSOLIDATED

2015

2016 Restated*R’000 R’000

Current assets

Cash and cash equivalents 131 421 267 609

Trade and other receivables 1 605 1 874

Deposits and prepayments 1 913 1 940

134 939 271 423

Non-current assets

Property, plant and equipment 333 802 332 404

Mining tenements and mining development 1 414 184 1 212 060

Deposits and loan receivables 20 436 27 538

1 768 422 1 572 002

TOTAL ASSETS 1 903 361 1 843 425

Current liabilities

Trade and other payables 76 588 68 610



121 297 102 803

Non-current liabilities


Borrowings 392 758 292 634

Royalties payable 21 392 25 457

435 949 320 003

TOTAL LIABILITIES 557 246 422 806

NET ASSETS 1 346 115 1 420 619

Equity

Contributed equity 2 229 377 2 229 377

Reserves (331 249) (244 129)

Accumulated losses (552 013) (564 630)

TOTAL EQUITY 1 346 115 1 420 619

* Please refer to Note 3 ‘Critical accounting estimates and judgements’.For

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Rand accounts

CASH FLOW STATEMENTS – ZAR CONVENIENCE TRANSLATION (SUPPLEMENTARY INFORMATION)For the year ended 30 June 2016

CONSOLIDATED

2016 2015R’000 R’000

Cash flows from operating activities

Payments to suppliers and employees (inclusive of government charges) (56 702) (24 763)

Interest received 2 218 6 423

Finance costs (232) (76)

Taxation payments (11) (38)

Net cash outflow from operating activities (54 727) (18 453)

Cash flows from investing activities

Payments for property, plant and equipment (5 671) (3 567)

Net payments for mining related licence deposits – (2 704)

Payments for mining tenements and mining development (93 317) (271 214)

Net cash outflow from investing activities (98 988) (277 484)

Cash flows from financing activities

Repayment of borrowings (20 436) –

Net cash outflow from financing activities (20 436) –

Net decrease in cash and cash equivalents (174 151) (295 936)

Cash and cash equivalents at the beginning of the year 267 609 541 707

Effects of exchange rate movements on cash and cash equivalents 37 964 21 838

Cash and cash equivalents at the end of the year 131 421 267 609

Foreign currency reserve movements represent an appreciation of the A$ against the Rand of 17.3% (2015: 6.0% depreciation).

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Shareholder informationAs at 6 September 2016

1. SUBSTANTIAL SHAREHOLDERSThe names of the substantial shareholders and the number of shares to which they are entitled are:

Name Number of Shares Percentage

Government Employees Pension Fund 113 309 805 19.490%

Noble Resources International Pte Ltd 79 609 933 13.693%

Shinto Torii Inc 62 124 089 10.686%

Integrated Coal Mining Ltd & Associates 30 463 175 5.240%

2. ORDINARY SHARES ON ISSUE(a) Total number of ordinary shares on issue - 581 380 338

454 229 293 ordinary shares are quoted on the Australian Securities Exchange (ASX) under the code RES and 127 151 045 are quoted on the Johannesburg Stock Exchange (JSE) under the code RSG

(b) Distribution of ordinary shares:

Range of holding Total holders Number of shares % Issued Capital

1 – 1 000 535 248 534 0.043

1 001 – 5 000 681 1 963 791 0.338

5 001 – 10 000 385 3 155 255 0.543

10 001 – 100 000 885 33 755 746 5.806

100 001 and over 315 542 257 012 93.271

Total 2 801 581 380 338 100.000

(c) The number of ordinary shareholders holding less than a marketable parcel (5 682 shares) is 1 257 representing 2 432 067 ordinary shares.

(d) The 20 largest ordinary shareholders together held 408 619 455 shares representing 70.284% of the total issued ordinary shares.

3. VOTING RIGHTSAt a general meeting of the Company on a show of hands, every member present in person, or by proxy, attorney or representative has one vote and upon a poll, every member present in person, or by proxy, attorney or representative has one vote for every share held by them.

No voting rights attached to options or performance rights.

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Shareholder information

4. TWENTY LARGEST ORDINARY SHAREHOLDERSName Number of shares Percentage

1 Government Employees Pension Fund 113 309 805 19.490%

2 Noble Resources International Pte Ltd 79 609 933 13.693%

3 Shinto Torii Inc 62 124 089 10.686%

4 Yapp Pty Ltd 24 390 591 4.195%

5 Valu Investments Pte Ltd 22 727 273 3.909%

6 Ivanovic & Company Limited 19 743 784 3.396%

7 Integrated Coal Mining Limited 18 268 053 3.142%

8 Bantal Singapore Pte Ltd 12 195 122 2.098%

9 Mr Ronald Charles Tyack 7 754 010 1.334%

10 Citicorp Nominees Pty Limited 7 749 864 1.333%

11 Lukale Mining Company (Pty) Ltd 6 784 334 1.167%

12 Jenfre Nominees Pty Ltd <Peter Giuffre Family A/C> 4 525 136 0.778%

13 HSBC Custody Nominees (Australia) Limited - A/C 2 4 460 499 0.767%

14 Resgen Scrip Lending (Pty) Ltd 4 205 500 0.723%

15 J P Morgan Nominees Australia Limited 4 113 665 0.708%

16 HSBC Custody Nominees (Australia) Limited 3 827 081 0.658%

17 Bond Street Custodians Limited <3M1cw - V51193 A/C> 3 325 783 0.572%

18 Metallica Investments Pty Ltd 3 188 266 0.548%

19 Mr Stephen James Matthews 3 166 667 0.545%

20 Mrs Skye Eleanor Walker 3 150 000 0.542%

408 619 455 70.284%

5. DETAILS OF UNLISTED OPTIONS Nil

6. SHARE REGISTRY DETAILSBoardroom Pty LimitedLevel 12225 George StreetSydney NSW 2000Australia

Telephone: (02) 9290 9600 Facsimile: (02) 9279 0664

Free Call: 1300 737 760 Website: www.boardroomlimited.com.au

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Notes

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Corporate directory

DIRECTORS

Denis Gately (Chairman)Lulamile Xate (Deputy Chairman)Rob Croll Colin GilliganLeapeetswe MolotsaneDr Konji Sebati

COMPANY SECRETARY

Michael Meintjes

AUDITORS

Deloitte Touche TohmatsuRiverside Centre123 Eagle StreetBrisbane QLD 4000Australia

BANKERS

St George Bank LimitedThe Standard Bank of South Africa LimitedBarclays Bank Mauritius Limited

REGISTERED OFFICE

Level 117 Station RoadIndooroopilly QLD 4068Australia

Telephone: +27 12 345 1057Facsimile: +27 12 345 5314Website: www.resgen.com.au

PRINCIPAL PLACE OF BUSINESS

Unit 2, Carrera House15 Sovereign DriveR21 Office ParkIrene 0157South Africa

STOCK EXCHANGE LISTING

Securities of Resource Generation Limited are listed on both the Australian Stock Exchange and the Johannesburg Stock Exchange.

ASX Code: RESJSE Code: RSG

SHARE REGISTRY

Boardroom Pty LimitedLevel 12225 George StreetSydney NSW 2000Australia

Investor Enquiries: +61 2 9290 9600Facsimile: +61 2 9279 0664Website: www.boardroomlimited.com.au

TRANSFER SECRETARIES

Computershare Investor Services (Pty) LimitedGround Floor70 Marshall StreetJohannesburg 2001South Africa

Investor Enquiries: +27 11 370 5000Website: www.computershare.co.za

JSE SPONSOR

Deloitte & Touche Sponsor Services (Pty) LimitedBuilding 8, Deloitte PlaceThe WoodlandsWoodlands DriveWoodmeadSandton 2196South Africa

COUNTRY OF INCORPORATION

Australia

9682/16

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resgen

http://www.resgen.com.au/

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resgen for personal use only - asx · • in-pit waste dumping to reduce impact • mining plan to...

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